German Finance Minister Wolfgang Schaeuble (left) and EU economic affairs chief Olli Rehn urged Ireland Tuesday to be realistic and drop opposition to raising a corporate tax rate critics say is unfairly low. “If Ireland wants something additional from us, then we can raise that issue,” said Schaeuble of Dublin’s demand for the interest rate on its EU and IMF bailout to be reduced, in line with the easier terms granted to Greece last Friday. The German minister was recalling a clash between Irish Prime Minister Enda Kenny and French President Nicolas Sarkozy on the issue at last week’s eurozone summit that is sure to be revisited at a full European Union summit next week. – AgencyFrancePress
Dominant Social Theme: These kind of tax breaks must cease. They are radical, insubordinate and impractical.
Free-Market Analysis: “This can’t stay like this,” says German Finance Minister Wolfgang Schaeuble, speaking of Ireland’s fairly low 12.5-percent corporate rate. According to Agency France Press (see article excerpt above) Schaeuble claimed that US Treasury Secretary Timothy Geithner had also brought up the issue recently, worrying that too many American companies were choosing to base themselves in Ireland for tax reasons.
“Solidarity is not a one-way-road,” Schaeuble is quoted as saying. And EU Economic Affairs head Olli Rehn agreed, reportedly urging new Irish leader Enda Kenny to support an upcoming EU strategy to set up a unified business taxation regime throughout the EU. EU’s taxation commissioner Algirdas Semeta is about go public with the new EU-wide tax proposals.
The linkage between Ireland’s supposedly low tax rate and its 67.5-billion-euro international bailout is not explicit. But at last week’s EU summit, Ireland’s request for a 100-basis point haircut on its loan package was rejected even though Greece received a reduction. Press reports made it clear that EU leaders wanted to see flexibility on the issue from Ireland. Rehn is quoted as acknowledging “some relation” between the corporate tax rate and the EU’s rejection of Ireland’s request for slightly better terms.
For Rehn, tax coordination, as he calls it, is increasingly important to EU strategy and policy. He believes proposals for a Common Consolidated Corporate Tax Base are both “reasonable” and gradual. “I would only encourage a constructive approach by Ireland on policies related to taxation, especially the commission’s proposals on CCCTB.”
The plan has been gestating for nearly a decade now and is intended to provide multinationals with a single, coordinated tax rate rather than a series of idiosyncratic national systems. For Ireland, the coordinated tax coming on top of its current sovereign debt crisis will provide a kind of deliberate death-blow. One wonders what the top Eurocrats are thinking. Ireland is not going to be able to pay for the debts its banks have accrued anyway; a higher tax rate will eviscerate its international software and pharmaceutical industries. Companies arrived as a result of the low tax burden; they will depart if it is raised.
None of this matters to Brussels. The claim is that the average corporate tax rate in the Eurozone is 25.7 percent or double that of Ireland. France’s rate, alone, is 34.4 percent; though critics point out these rates are wildly inflated as a result of “give backs” and that France’s all-in corporate tax rate for the larger multinationals actually ends up near eight percent – lower than Ireland’s….