The Wall Street Journal has stated that European leaders are “beating up the Irish” in a mistaken attempt to get them to raise their corporate tax rate.
The editorial comes in the wake of strong comments by German Chancellor Angela Merkel and French president Nicholas Sarkozy that they were dissatisfied with Irish Prime Minister Enda Kenny’s statement that Ireland would not change its 12.5 corporate tax rate, hugely important to American companies who operate in Ireland.
The both stated that Ireland could not get a better deal on its loans from Europe unless the tax rate was changed.
European Council president Herman Van Rompuy said the Irish “haven’t met all the conditions, so can’t have reduced interest rates.”
In an editorial in their international edition, the WSJ stated that “You might think that Berlin, Paris and Brussels—all lenders to Dublin—would want to maximize the chances that they'll be paid back by encouraging helpful economic policies. But resentment on the Continent over Ireland's 12.5% tax rate apparently trumps economic rationality.”
“Even in 2009, amid recession and a contracting economy, Ireland managed to collect the equivalent of 2.4% of GDP in corporate income tax revenue, compared to 1.3% for Germany and 1.4% for France.
his is a testament to the efficiency of Ireland's low rate in encouraging investment, economic growth and tax payments. Instead of punishing Ireland for its enlightened tax policy, politicians on the continent should be emulating it.” the editorial says.
However, French president Sarkozy stated bluntly Ireland had to change “No one is asking Ireland to have an average rate which is comparable to Europe, but it’s also difficult to ask other countries to bail out Ireland when Ireland is determined to keep the lowest tax on profit in Europe.”
“Ireland is going to have to come to terms with that, but there’s a very clear request from the members of the euro zone that there be at least some gesture.”