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UPDATE 1-Kenny tells Merkel would not change Irish corporate tax
February 14, 2011 / 1:50 PM / 7 years ago

UPDATE 1-Kenny tells Merkel would not change Irish corporate tax

* Opposition leader briefs Merkel head of Feb. 25 vote

* Says Ireland won’t consider changing corporate tax

* Does support fiscal and pension age measures

(Adds details and quotes)

By Eric Kelsey

BERLIN, Feb 14 (Reuters) - Irish opposition leader Enda Kenny told German Chancellor Angela Merkel on Monday his country would not change its low corporate tax rate as part of a euro zone “competitiveness pact” championed by France and Germany.

Kenny, whose Fine Gael party looks set to lead the next coalition government, met Merkel in Berlin to brief her on the Irish situation ahead of an Irish national election on Feb. 25 and ahead of two summits on the euro zone crisis scheduled for next month.

“We identified the priorities for her from our point of view: the interest rates, the banking problem, the political issues and the corporation tax rates,” Kenny told Reuters.

His centre-right party is expected to become the largest and to govern in coalition with Labour -- or with the support of independents if its own recent strong poll performance continues.

Both Fine Gael and Labour promise to renegotiate part of Ireland’s 85 billion euro bailout package from the European Union and International Monetary Fund and want to impose losses on senior bondholders not covered by a government guarantee.

Asked whether he and Merkel discussed the competitiveness pact, proposed by Germany and France this month, Kenny said Ireland would not cede to pressure to raise corporate tax rates.

“We would see no change in that for Ireland, it is absolutely fundamental to our tax base for foreign direct investment,” he said outside the headquarters of Merkel’s Christian Democratic Union.

Corporate tax in Ireland is just 12.5 percent, less than half that of major European economies, if local taxes are included in countries like Germany.

The pact proposes setting a minimum corporate tax rate in the currency zone, but Ireland has described this as a red line that cannot be crossed, for fear of discouraging investment and causing more damage to its debt-laden economy.

Germany and France also propose scrapping the indexation of wages to inflation and want other euro zone countries to emulate Germany’s “debt brake” law imposing fiscal discipline.

“We’re prepared to discuss other issues of pension age increases -- we’re signed on for that. Wage reductions have taken place in Ireland. Fiscal consolidation and regulation -- we’re very much in support of that, but not in respect to the corporation tax rates,” said Kenny. (Reporting by Eric Kelsey; writing by Stephen Brown; Editing by Susan Fenton)

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