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Ireland corporate tax 'part of bailout talks': Germany

22 November 2010, 17:25 CET
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(BERLIN) - Germany said Monday that Ireland's low rate of corporation tax would be among the points under negotiation for an EU bailout package, apparently contradicting earlier statements from Dublin.

"The German government will not be making proposals" regarding potential reforms to be put in place for the up to 90-billion-euro (123-billion-dollar) package, spokesman Steffen Seibert told a regular news conference.

"But it is clear that corporation tax should be one point among others when one considers how to increase the 'receipts' part of the budget," Seibert said.

Debt-wracked Dublin agreed on Sunday to ask the European Union and International Monetary Fund for a bailout, making Ireland the second eurozone country to be rescued this year since Greece in May.

But Ireland's Prime Minister Brian Cowen stressed that calls from other eurozone countries to raise Ireland's controversial 12.5 percent corporation tax had "not arisen" in negotiations.

The average corporation tax rate across the 16 countries that share the euro is 25.7 percent.

European Union nations have long criticised Ireland's comparatively low corporation tax rate, which they say grants Dublin unfair leverage when it comes to securing international investment from global giants such as Microsoft or Google.

Seibert added that Dublin had to focus not just on reducing expenditure but also raising more money for its budget.

An EU source told AFP Monday that the Irish government is willing to consider modifying the corporation tax as part of the rescue package.

"Ireland is considering enlarging the tax net for companies" even if the percentage "will not change," said the source, who is close to a fifth day of EU-IMF negotiations with Dublin on bailout conditions.

Germany's top-selling newspaper Bild, which had railed against the Greek rescue with reports about profligate government spending, called Irish policies a "scandal".

"First the country steals jobs and tax revenue from other countries with its extremely low taxes, and now the other countries have to pay up for the second time to prevent its banks from collapse," it said in an editorial.

Earlier Monday, Germany's Deputy Foreign Minister Werner Hoyer said that the package could calm markets but added that EU leaders urgently needed to negotiate the terms of a permanent safety net to protect the euro.

"The umbrella has been deployed, this shows how important it was to have it," Hoyer told reporters ahead of a meeting of European Union foreign ministers in Brussels.

"It is even more important that we start on a permanent mechanism in Europe during the European summit in December," he said.

Hoyer said he was optimistic that the billions of euros (dollars) available to Ireland "can help to reassure the markets" and give Dublin the "psychological umbrella" needed.

Seibert reiterated Berlin's desire to have private investors contribute to the costs of any future bailout after the mechanism set up in the wake of the Greek crisis expires in 2013.

"The justification for this reasoning is now being amply demonstrated," Seibert said.

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