Luxembourg backs Ireland on corporate tax

Ireland should not have to raise its controversial corporate tax as a condition for receiving a bailout, the foreign minister of fellow eurozone member Luxembourg said Tuesday.

“The situation that Ireland finds itself in is already difficult enough,” Jean Asselborn told the German daily Tagesspiegel. “We should be careful not to strangle Ireland. Ireland has already lost so much economically.

“And if we take away every attraction Ireland has for inward investment then things will only get worse. And the worse it gets, the more expensive will it get for Europe in the end.”

Asselborn singled out for criticism French President Nicolas Sarkozy for comments made in Lisbon over the weekend that Ireland had “more room for manoeuvre than others” to raise taxes.

“I don’t think it is a good for a head of state to call on Ireland to hike taxes,” Asselborn said.

Ireland’s 12.5-percent corporate tax rate has attracted many firms, especially from the United States, to set up business there but critics say that this gives the country an unfair advantage. The average corporate tax rate across the 16-country eurozone is 25.7 percent.

Germany, Europe’s biggest economy, said on Monday that the tax should be “one point among others” to be discussed when details of a bailout are hammered out. France has said a cut was desirable.

Ireland applied for help on Sunday from the European Union and International Monetary Fund to help it cope with a gaping budget deficit and a deeply troubled banking system.

While the amount of the package has yet to be revealed, European diplomats have said it could come to around 90 billion euros (120 billion dollars).

Irish Prime Minister Brian Cowen was quoted in Germany’s Bild daily on Tuesday as saying that his country was not under pressure over the corporate tax rate.

An EU source told AFP on Monday however that the Irish government was willing to consider modifying it.