Sarkozy's corporate tax concern politically motivated - Lenihan

FORMER MINISTER for finance Brian Lenihan has accused French president Nicolas Sarkozy of being fixated by Ireland’s corporation tax for domestic political reasons.

Mr Lenihan, now Fianna Fáil spokesman on finance, said internal politics was the reason why France was being so insistent. “As in many European matters, this comes back to local politics and the position of different politicians in their own state. I believe President Sarkozy is pushing this situation solely for domestic purposes,” he said.

He urged his successor Michael Noonan and Taoiseach Enda Kenny to stand firm against any attempts by France or Germany to use Ireland’s corporation tax rate as a quid pro quo for a reduction in the interest rate on the EU-IMF loan.

Mr Lenihan said his own experiences in Europe showed that the French were “fixated for many years” about Ireland’s corporation tax rate.

“In fairness to Germany, I don’t believe they have pushed this issue as strongly as the French,” he said.

Ireland’s corporation tax rate was the subject of a heated discussion between Mr Kenny and Mr Sarkozy at the recent EU summit.

Mr Lenihan said “huge pressure” had been brought by Germany and France during the EU-IMF bailout negotiations in relation to the corporation tax issue, but both the French and German leaders had conceded that it could not be part of any arrangement with Ireland.

The European Commission had agreed before the last government left office that an interest rate reduction on the EU part of the bailout was appropriate, Mr Lenihan said.

However, it had to be approved by the member states and they were using it to revisit the area of Ireland’s corporation tax rate.

Mr Lenihan suggested that if the issue of corporation tax is being raised, so too should be the “huge subsidies” countries such as France give their industrial base by way of research grants for their defence and aeronautical industries.

“For a small country like Ireland, the most realistic policy is a tax-based policy,” he said.