Ireland’s low corporate tax rate is fast becoming the republic’s economic Alamo. The Irish government is coming under renewed pressure to give ground on the 12.5 percent rate, one of the lowest in the developed world.
And the pressure is being exerted by the Germans and the French, the two dominant countries in the EU’s eurozone.
In what it described as a “shock proposal” from France and Germany, the Irish Independent reported that French President Nicolas Sarkozy and German Chancellor Angela Merkel were looking to a harmonization of corporate tax levels in euro-using countries.
And Ireland would be facing a referendum within 12 months which would potentially impose borrowing limits for the day-to-day running of the country, the daily reported.
“Both proposals would have serious long-term implications for taxpayers as they would restrict how a government raises exchequer finance,” it stated.
Borrowing limits would be imposed under a so-called “golden rule.”
The proposals had Irish finance minister Michael Noonan insisting that Ireland would retain control of its economic sovereignty.
He said that any deal on limiting debt would require a “constitutional amendment” that would only be possible through a referendum.
The current Irish government, and its predecessor, have consistently insisted that Ireland will not give ground on its low corporate tax rate which is seen as a vital incentive for overseas corporations, many of them American, that either have operations underway in Ireland, or are considering such a move.