Noonan defends 12.5% corporate tax rate

Minister for Finance Michael Noonan yesterday defended Ireland's corporate tax regime, following a meeting of EU finance ministers at which ministers agreed to begin negotiations with neighbouring countries on new rules on tax disclosure.

Speaking in Brussels yesterday evening, Mr Noonan said Ireland does not "aggressively tax plan" and has a "fully transparent tax system".

"Setting rates of tax is a matter for sovereign countries. We have decided to have a low nominal rate of corporation tax at 12.5 per cent, other countries have higher nominal rates," he said, pointing out that other European countries had higher nominal but lower effective tax rates in place.

'No problems with rate'
"We have no problems with our corporation tax rate, and none of our colleagues are putting us under any pressure whatsoever," he said. "If you look at what's happening across Europe, the rate of corporate tax is moving down."

The issue of tax evasion has crept up the European political agenda in recent months, sparked by high-profile tax evasion scandals involving former French budget minister Jérôme Cahuzac and president of Bayern Munich football club, Uli Hoeness. Following discussions yesterday on a common approach to tax evasion, Austria and Luxembourg backed an EU proposal to commence discussions with Switzerland, Liechtenstein, Andorra, Monaco and San Marino on the sharing of tax information.

Disclose information
However, the two countries failed to support a proposal to update the existing EU Savings Tax Directive, which obliges countries within the EU to disclose information on savings on income. Austria and Luxembourg opted out of the directive in 2003. In a joint press conference following yesterday's meeting both finance ministers said they wanted greater clarity about which products would be covered under the amended directive. They also stressed the need for a "level playing field internationally" in terms of tax disclosure. The issue of tax evasion is expected to dominate next week's summit of EU leaders in Brussels.

EU finance ministers also agreed to disburse €7.3 billion towards the 2013 draft amending budget, which will allow discussions between the Irish presidency of the European Council and the European Parliament on the seven-year budget to proceed. Sanctioning extra spending for this year had been resisted by several countries, including Britain. The decision may cause domestic political difficulties for British prime minister David Cameron as he faces pressure over EU membership.

Separately, significant divergences emerged between finance ministers in the first political discussion at ministerial level on the bloc’s proposed rules on winding down banks. New rules on banking resolution are a central strand of the EU’s policy of banking union.

Under a compromise proposal put forward by Irish officials ahead of yesterday's meeting, a deposit preference scheme would operate which would set out a hierarchy of creditors to be bailed-in in the event of bank resolution, with deposits of over €100,000 last in line.

Bail-in
However, a number of countries said bondholders and uninsured depositors should be treated equally in any bail-in. British chancellor George Osborne called for greater flexibility, raising concerns about the possible impact of the rules on financial markets and the pricing of debt, echoing calls by Dutch finance minister Jeroen Dijsselbloem for a "bail- inable buffer" for systemic banks .