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Financial Planning > Tax Planning

France’s Lagarde Pressures Ireland on Corporate Tax Rate

By Marlene Y. Satter

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As Ireland pressed for a better interest rate on the bailout package that it received from the European Union (EU) and International Monetary Fund (IMF), French Finance Minister Christine Lagarde pushed back in an effort to convince Ireland to increase its corporate tax rate.

The tax rate has been a sore subject for months as Ireland has insisted that changing it would harm its already-damaged economy even further.

Reuters reported that at the summit meeting of euro zone ministers, Ireland asked once again for its interest rate to be reduced, but Lagarde again raised the issue that France and Germany have insisted on for some time—that Ireland should relinquish its 12.5% corporate tax rate. The tax, the lowest in the region, has been the source of complaints from other euro zone members that it gives Ireland an unfair advantage in business.

While Dublin has signaled that it is willing to consider ratifying EU rules on a Common Consolidated Corporate Tax Base (CCCTB), providing for pooling tax collection across countries—a measure it has previously resisted—Lagarde said that was not enough. The tax rate must be modified as well, she insisted. France and Germany are saying that before Ireland’s bailout interest rate can be modified, Dublin must give ground on the tax rate.

In the report, Lagarde was quoted as saying, "I hope we will see good common interest in really arriving at a more level situation." She added that Ireland needed "a bit of time to figure out what is appropriate."

Any potential changes to Ireland’s bailout will have to wait until after Ireland’s banks undergo stress tests next week, according to the president of the European Council.

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