I agree with Deputy Noonan's assertion that the 10 per cent rate of corporation tax has been one of the key determinants of Irish economic success in recent decades. It has been a major component in attracting foreign direct investment to Ireland. Some foreign commentators would like to give the impression that it is the main reason for Irish economic success, but I am sure Deputies on all sides agree this is not the case.
The Deputy's second question related to tax harmonisation. At the ECOFIN Council meeting on 1 December 1997 we agreed to resolve three matters within three years, namely, to formulate a code of conduct on business taxation, to progress the tax and savings directive and to deal with the interests and royalties directive. These three items were regarded as part of the same package.
We have had considerable difficulty recently in moving forward on the tax and savings directive. A meeting on this matter took place earlier in the week and no progress was made. We will strive to ensure it is dealt with at the Helsinki Council, but if last Monday's meeting is indicative, we will have considerable difficulty in this regard.
The code of conduct on business taxation does not refer to harmonisation, it relates to distortion of the marketplace. As stated in the last part of my original reply, the agreed conclusions of the Vienna European Council specifically stated that it does not mean harmonised tax rates.
Deputy Noonan's final question related to assurances regarding the future. There is nothing on the immediate horizon to place in jeopardy Ireland's move to a 12.5 per cent corporation tax rate for all new operations on 1 January 2003, as agreed by the Commission. When the code of conduct report is published, it will list that rate but since we have agreed this procedure we will face no difficulties. I can give an assurance in that regard to companies that wish to establish operations in Ireland.
As stated previously, it is my view that, for a number of years, the entire focus in Europe has concentrated on Ireland and its low 10 per cent rate. Recent budgets introduced by other European Finance Ministers recognise the folly of having high corporation tax rates and they are considering reducing them. More than 18 months ago I stated that Europe would move more towards the Irish position. That said, however, I doubt whether some member states will discontinue the practice of raising the question of tax harmonisation in the future. Despite what I said earlier, some countries, for ideological and other reasons, desire the introduction of harmonised tax rates.
I do not believe unity will ever be achieved among members of the European Council regarding the harmonisation of taxes. I predict the emphasis will lie in the other direction. There are some countries which will not give up the idea of harmonisation.