Bulgaria, Ireland Form United Front against Common EU Corporate Tax

Bulgaria in EU | April 1, 2011, Friday // 15:20|  views

Bulgaria's Finance Minister Simeon Djankov (left) met with Ireland's new Prime Minister Enda Kenny (right) in Dublin on Friday, April 1, 2011. Photo by Finance Ministry

Bulgaria and Ireland have agreed to "strand up for their competitive advantages in the EU", in the wording of Bulgaria's Finance Ministry, apparently referring to joint opposition against common EU tax rates.

Bulgaria's Finance Minister and Deputy PM Simeon Djankov met in Dublin Friday with Ireland's Prime Minister Enda Kenny amidst increasing EU-wide debate on common EU tax rates that are on the agenda on the so called "Euro-Plus-Pact", a grouping of euro zone countries and prospective euro zone states initiated by France and Germany.

Djankov, whose brief working visit in Ireland can be described as a "surprise" visit since it was not announced in advance, has delivered to Ireland's new PM Enda Kenny greetings by his Bulgarian counterpart Boyko Borisov on the occasion of Kenny's entering into office

Djankov and Kenny agreed to cooperate and coordinate their countries' positions on EU fiscal and tax policies.

"The two countries have a unified position in support of preserving their low corporate taxes that exist at the moment," Bulgaria's Finance Ministry says with respect to Djankov's meeting with Ireland's Finance Minister Michael Noonan.

Djankov has made it clear that Bulgaria will continue to back Ireland in its position on preserving its low corporate tax rates.

The finance ministers of Bulgaria and Ireland have agreed that the favorable tax environment in both countries is a major advantage of theirs, and will stand up for this position within the EU-wide debate on the proposed coordination of tax policies between EU member states.

Djankov and Noonan's talks further focused on the condition of the bank sectors in Bulgaria and Ireland as well as the political commitments ensuing from the participation of the two countries in the so called "Euro-Plus-Pact", for which Bulgaria vowed support when it was formally approved by the EU state leaders during the European Council summit on March 24-25.

As part of his working visit in Ireland, Bulgaria's Finance Minister Djankov will deliver a public lecture in the Institute of International and European Affairs in Dublin.

Earlier this week, Bulgaria's Deputy Finance Minister Boryana Pencheva made it clear that Bulgaria's has opposed the introduction of common EU tax rates - after the recent proposal for the introduction of a Common Consolidated Corporate Tax Base (CCCTB), a move towards harmonized corporate tax in the EU on part of the European Commission on March 16, 2011, which essentially involves a single set of rules for the calculation of taxable profits for corporate tax purposes across the EU.

At present, Bulgaria has the lowest tax burden in the entire EU, and the lowest EU corporate tax rate - a flat 10% tax; this proves one of its competitive advantages in its quest to attract badly need foreign direct investment as it remains the poorest country in the 27-member bloc.

Ireland has a corporate tax rate of 12.5%, and has been under tremendous pressure by the France-German core of the EU to increase it as it is already receiving a tens of billions of euros in bailout aid from through the euro zone emergency mechanism.

The European Commission claims that the CCCTB was designed to make it easier for companies to run cross-border businesses as profits made in a particular member state would be taxed according to the corporate tax rate of the country where the money was actually made.

The Commission insists that this is not about harmonizing corporate tax rates, that the scheme will be voluntary and that it will reduce the administrative burden and boost cross-border ventures.

Newly-elected Irish Taoiseach Enda Kenny has disagreed saying that such moves introduce tax harmonization by the back door. Kenny has recently been in a row with French President Nicolas Sarkozy, who asked Ireland to raise its low corporate tax, currently at 12.5%, to get a 1% discount on the interest rate it pays on its EU bailout.

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Tags: finance minister, Michael Noonan, Simeon Djankov, Enda Kenny, ireland, euro, Nicolas Sarkozy, Angela Merkel, France, Germany, Prime Minister, Boyko Borisov, EU, Euro Area, euro zone, euro-plus-pact, Euro Pact, European Council, Boryana Pencheva, Common Consolidated Corporate Tax Base, CCCTB, bailout, corporate tax rate, corporate tax


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