Fine Gael MEP Brian Hayes warns of ‘Irexit' if EU clamps down on the Republic's corporation tax regime
AN influential Fine Gael figure has warned that EU efforts to dilute the Republic's generous corporation tax regime could see the south following the UK out of the EU.
In an intervention that is unlikely not to have been sanctioned by the Dublin government, MEP Brian Hayes described EU demands for tax harmonisation as an "absolute red line issue".
The Republic's business tax breaks have come in for scrutiny since it emerged that Apple, which has a large plant in Cork, enjoyed favourable rates.
In preliminary findings in 2014, European antitrust authorities said Apple’s tax arrangements were improperly designed to give the company a financial boost in exchange for jobs.
The UK is seen as one of Republic's key allies in fending off demands for tax EU harmonisation but last week's Brexit vote means Whitehall can no longer be relied on.
The south's 12.5 per cent corporation tax rate, which Stormont aims to match, is seen as key in attracting overseas investors and jobs.
However, it is feared that the outworkings of the UK referendum vote could signal an end to the Republic's veto on changes to its tax system.
Mr Hayes said that any attempt to restrict the Republic's fiscal flexibility – especially amid speculation that Britain was planning a further cut to its corporation tax rate – could trigger a so-called 'Irexit'.
"Any attempt made to cajole us [on corporation tax], as far as I'm concerned, we're out the door," the Fine Gael MEP told the Irish Independent.
"We cannot be tied into an anti-business, anti-growth pact while the Brits are allowed to move on – we have a lot more to lose than anybody else."
The Dublin government's minister for public expenditure Paschal Donohoe said Ireland would be looking to other countries with similar tax regimes to help fight any potential clampdown led by Germany and other EU big guns.
"Even though the UK will be leaving, the rationale for our corporation tax regime hasn't changed," Mr Donohoe said.
"We've always been very clear that we have this particular system in place, which is transparent to offset other disadvantages that our economy has, not least the fact that we are a small, open economy but not part of the continent of Europe."