Ireland 'May Quit' Bulgaria-Led EU League of Low Corporate Taxes

Finance | November 19, 2010, Friday // 13:29|  views

A file photo shows pedestrians walking past the Bank of Ireland in Dublin, Ireland. Irish Central Bank governor Patrick Honohan expects the Irish Republic to accept a "very substantial loan" as part of an EU-backed bail-out. Photo by EPA/BGNES

Ireland may be forced to raise the country's corporate tax rate, one of the lowest in Europe following Bulgaria and Cyprus, in return for a European Union-led bail-out, analysts say.

"There is a worry that Ireland could be required to charge higher taxes on companies," analyst Alan McQuaid told CNN.

Ireland currently has the third-lowest corporate tax rate in the European Union, after Bulgaria and Cyprus, he said.

"It's a main plank of industrial policy here," McQuaid told CNN. "I think it would be counterproductive if Ireland were forced to raise corporate taxes. In effect, you'd be giving it one hand and taking away the other, and I think it would seriously damage Ireland's prospects on generating economic growth going forward that we need to get our budget back in balance."

Officials from the International Monetary Fund and European Central Bank arrived in Ireland on Thursday to examine the country's debt crisis on a visit, which could result in a substantial loan.

Ireland's corporate tax rate currently stands at 12.5%,  much lower than the EU average, but still higher than Cyprus and Bulgaria.

Bulgaria has the lowest personal and corporate income tax in the EU at 10%, which was introduced at the beginning of 2008, replacing the previous system, which combined several different tax rates - between 20 and 24%, depending on income.

Bulgaria also has the lowest social security rates, which coupled with a 10% flat rate, makes it very attractive for physical entities, employers and potential investors.

The highest personal income taxes in the world are still paid by the citizens of the European Union (EU), a recent KPMG survey found out.

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Tags: Cyprus, Bulgaria, bailout, Eurozone finance ministers, Simeon Djankov, European Commission, European Central Bank, IMF, Dublin, ireland, EU-IMF troika team, ECB, International Monetary Fund, Patrick Honohan, Irish government, corporate tax rate, debt crisis


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