Vol. 495 No. 2
35 Mr. Noonan asked the Minister for Finance if he has finalised negotiations on the introduction of a single corporation profit tax of 12.5 per cent; if so, when the single rate will be introduced; the interim schedule for its introduction; and if he will make a statement of the matter. [19702/98]
I can confirm that agreement has been reached with the EU Commission on the timetable for phasing out the 10 per cent rate of corporation tax for manufacturing and certain internationally traded services, including those provided from the IFSC and Shannon. The agreement, which was announced by the Government on 22 July 1998, will mean that the single 12.5 per cent rate of corporation tax for trading activities will generally apply from 2003. However, existing projects which were entitled to the 10 per cent rate at 22 July 1998, plus certain IDA and IFSC pipeline projects approved by 31 July 1998, will retain entitlement to the 10 per cent rate until the end of 2005 in the case of the IFSC and Shannon or until the end of 2010 in the case of manufacturing and certain internationally traded services.
The agreement also provides that new projects established after 22 July 1998 in manufacturing and certain internationally traded services, including new projects in the IFSC and Shannon, will be eligible for 10 per cent until the end of 2002 after which they will be subject to the 12.5 per cent rate. However, the deadline for approving new projects at the IFSC and Shannon has been brought forward by one year to the end of 1999, which will mean that new IFSC and Shannon projects establishing after this date will be subject to the standard rate then applying. The agreement also regulates the number of new IDA and IFSC projects availing of the 10 per cent rate until 2003. In the period 1998 to 2002 inclusive, the number of new IDA approved greenfield projects and new IDA approved projects of established firms will be restricted to 77 per year, while the number of new IFSC projects in 1998 and 1999 will be restricted to 67 per year.
The question of reducing corporation tax rates between now and 2003 to facilitate the introduction of a 12.5 per cent rate for trading income by that year, and the related question of the timing of the 25 per cent rate for non-trading income, will be considered by the Government in the context of the forthcoming budget.
Can I take it that the Commission has signed off on this issue and that there are no outstanding elements to be negotiated?
There are no outstanding elements and the Commission has signed off. The two Commission decisions given effect in the agreement, for the IFSC and Shannon and for manufacturing and internationally traded services will be published in the official journal of the EU shortly. Legislation giving effect to the provisions of the agreement will be included in next year's Finance Bill.
Was a quid pro quo sought at the negotiations which has not yet emerged in public? Is there a demand that a 20 per cent standard rate of DIRT should apply to all deposit accounts, resident or non-resident, throughout the EU and has the Minster for Finance already informally committed the Irish Government to accept this?
The two matters to which the Deputy refers are totally unrelated. The negotiations regarding the 10 per cent tax rate have been going on for some time. The matter is now concluded. Separately there has been a tentative directive before the Commission for a long time regarding a rate of tax for interest on savings. That debate has moved forward in a different forum — the ECOFIN council. There is no connection between the two issues.
The debate with Commissioner Van Miert in his directive regarding the 10 per cent rate of corporation tax conducted since I became Minister for Finance related to the 10 per cent manufacturing tax rate and IFSC and Shannon related projects with no spill over into the other area. The debate on the proposed directive has been proceeding at ECOFIN for some time and various views have been expressed. I could not give a definite date for the likely conclusion of that debate but I assure the Deputy that there is no interaction between the two ideas.
Is the Minster confirming that there is no understanding between the Irish Government and the EU Commission about the imposition of a 20 per cent rate of tax on interest?
I can confirm absolutely that in the context of the negotiations regarding the new corporate manufacturing tax rate there is no connection between it and the other separate debate regarding a general tax on interest. There was no connection nor was any sought. It was not mentioned at any level in these negotiations. These negotiations have proved difficult and many matters arose in the debate but that was not one of them.
By way of written reply one of the Minister's colleagues informed me that the question of tax designation for urban areas has been deferred pending agreement by the EU Commission to certain proposals. Was that in the context of the negotiations which the Minister completed or is that a separate set of negotiations?
That is another set of negotiations which have been going on for some time which are proving equally difficult. Ireland's measures regarding incentive taxation such as designation, special corporation tax rates for manufacturing, the IFSC and Shannon and everything related to taxation have come under focus in Europe because of the country's success in recent years. The matters to which the Deputy refers are all in separate boxes but no matter where one goes in Europe I am afraid the taxation question comes up quite regularly.
