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UK Government has not discussed Irish corporation tax rate, says Osborne

printer Mail

Ireland should be in charge of its own tax rates, the Chancellor said yesterday as he outlined the UK’s participation in an international financial assistance package which will support ‘an ambitious four-year fiscal strategy’ to be set out by the Irish Government later this week.

Ireland’s 12.5% corporation tax rate was reported to be ‘a major point of contention’ in talks about a proposed bail-out. The Financial Times quoted a French official last Friday as saying that the rate was seen by some, elsewhere in Europe, as ‘almost predatory’.

An FT editorial claimed that the idea of exploiting the control over Dublin’s economic affairs that a European loan would imply in order to ‘force up’ the rate was ‘the ugliest expression of naked self-interest’.

George Osborne said he had agreed to offer a bilateral loan to Ireland, on top of funding from the IMF and the EU. ‘This is a situation of great difficulty for Ireland and it is a tragedy when it did so much to improve its competitiveness with low taxes and flexible labour markets, but the truth is that it had a hugely leveraged banking sector that was badly regulated,’ he said.

‘I think it is well known that corporation tax has been the subject of discussion in some European Union capitals, but not here – we believe that countries should be free to set their own tax rates.’

Labour MP Kate Hoey asked whether, in setting conditions for the loan, he would ‘take into account the feelings of people in Northern Ireland who, if they live on the border, see corporation tax at 12% just down the street, but at 28% in Northern Ireland, and will be asking why they are paying more to help a country when there is such a disparity in corporation tax’.

Osborne replied: ‘Ireland should be in charge of its own tax rates. How the terms of the financial assistance are met has to be a decision ultimately for the Irish Government and the Irish Parliament. It is the thin end of the wedge if we allow other countries and other international organisations to start determining what corporate tax rates should or should not be.

'It is in everyone's interests that Ireland grows, and it would not be particularly in our interests if the Irish undertook measures that might, for example, lead to an immediate flight of international business.’