THE GOVERNMENT believes the French government is “hardening” its stance in the battle over Ireland’s corporation tax regime, dampening hopes of an early deal to cut the interest rate on Irish bailout loans.
As the standoff intensifies with Paris over its demands on Dublin to increase the 12.5 per cent corporate tax rate, the Government is now drawing a clear distinction between the positions adopted by France and Germany.
In Brussels last night, Minister for Enterprise Richard Bruton said that France appeared to be pursuing a “one-item agenda” in relation to the corporate tax rate.
In Berlin, meanwhile, Minister of State for Europe Lucinda Creighton said the tax rate was not a “red line” issue for Germany.
With no end in sight to the logjam, Reuters quoted Minister for Public Sector Reform Brendan Howlin saying the Government wanted in due course to reschedule the debt accumulated under the EU-IMF rescue.
The Government insists it will not increase the corporate tax rate, but it has signalled its willingness to enter serious discussion on the common consolidated corporate tax base (CCCTB), a policy Taoiseach Enda Kenny recently described as a “back door” route to tax harmonisation.
However, Mr Bruton said this move had received a negative response from Paris. “It is my understanding that the Department of Finance did engage with colleagues in terms of the CCCTB and the French government did not signal an interest in pursuing that at that stage,” he told reporters.
Mr Bruton said there seemed to be a hardening in relation to the French position.
With talks on Monday between euro zone finance ministers set to be dominated by the increasingly precarious financial position of Greece, there is little prospect that the interest rate question will be settled at those talks. “It would appear that there isn’t going to be an agreement next week,” Mr Bruton said.
He also made the point that the interest rate on the Portuguese bailout, due to be signed off by the ministers next week, was three-quarters of a percentage point lower than the Irish rate.
The ministers’ talks take place against the backdrop of renewed reports that a restructuring of Greek debt may be in prospect. Die Welt reported yesterday that Germany backed “voluntary restructuring” of Greek debt, but Berlin said it had no knowledge of any such plan.
Germany took a hard line this week over its demands for a quid pro quo for a lower interest rate, but Ms Creighton praised Berlin’s “constructive” approach after talks yesterday.
“I think the French position [on tax] is much more trenchant, whereas there is much more understanding on the German side,” she said. “I had a good opportunity to put forward our case . . . and I don’t think the tax rate is a red line issue for Germany.”
As the EU Commission lowered its growth forecast for Ireland, Mr Howlin said the Government would not accept less favourable treatment than any other bailout recipient. “Obviously long-term rescheduling of debt is something that would be desirable and we will deal with it,” he said.
Asked about such remarks, Mr Bruton acknowledged there were “other options” in the policy mix. “Certainly there’d be no question that if some of those other policy options were to be adopted it would be a better framework from our point of view, but we are continuing to work the agreement that we have and that’s our position.”
Pressure to increase the corporate tax rate came from outfield, he said. “It’s not part of a programme that would help Ireland meet its obligations or achieve the recovery that’s necessary.”