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Noonan Outlines Ireland's Stance On Euro Taxes

September 2011 - Tax & Private Client. Legal Developments by Hassans.

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Ireland's corporate tax rate is safe and will not be hit by French and German plans to harmonize their levies as part of a pact to save the eurozone, Finance Minister Michael Noonan has said.

Speaking on RTE's Morning Ireland programme on August 17, Noonan was questioned on Angela Merkel and Nicolas Sarkozy's latest proposals for reform. Their plans include constitutionally limiting national deficit levels, introducing a financial transactions tax and the harmonization of French and German corporate tax rates. Noonan said he welcomes their reaffirmation to securing the future of the euro and making practical proposals to that end, adding that Ireland has a vested interest in ensuring the euro goes forward.

Commenting on the plans for corporate tax harmonization, Noonan insisted that Ireland's 12.5% rate is not under threat. He said that, were Germany and France to implement the plans, they would have no impact whatsoever on Ireland: the rate is safe. Noonan added that, until Ireland successfully renegotiated the terms of its bailout, the French in particular were pressurizing the government for change, in return for an interest rate reduction. Instead, the government gave no ground, Noonan said, meaning that there is now no threat if they stick to their principal position, which is that the rate is fundamental to the country's industrial policy, and that no concession will be made. If Germany and France want to harmonize their tax rates, that is their business, he stressed.

Turning to the proposal for a so-called "Tobin tax", Noonan anticipates strong objections from countries with a large financial services industry. In particular, he is concerned as to its implementation among European Union (EU) member states, namely whether it will be applied to all 27 jurisdictions, rather than just the 17 eurozone countries. Noonan argued that it cannot be allowed to give rise to a situation where the tax is levied in Dublin, but not in London. He said that, with Dublin competing internationally, if the terms of this competition changed in favour of London, it would have an adverse effect. He intends to watch the situation very carefully.

Noonan also offered comment on plans to constitutionally limit national deficits. Were this proposed by the EU, it would necessitate an Irish referendum, but Noonan believes it could be potentially attractive to the electorate, as it would prevent reckless borrowing by future governments. On the other hand, Noonan believes that events have already overtaken the proposal in Ireland. He recently established a Fiscal Advisory Council to give independent advice on deficits and will introduce legislation later this year to put a legislative break on borrowing levels in future budgets. Seeking to allay fears that, if introduced, the cap would represent a surrender of sovereignty to Europe, Noonan stressed that it in fact offered greater power to the Irish people, as the limit could only be altered via referendum, thus placing power in their hands. Nevertheless, at this stage, Noonan feels that, from Ireland's point of view, the proposal remains largely theoretical.


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