Former Welsh minister attacks 'freak' 12.5% tax

IRELAND has a “freakishly low” corporation tax rate which confers a “semi-tax haven status” on the country, former Welsh first minister Rhodri Morgan has complained.

Because of this, he claimed, Wales could not even get on the shortlist for investment by foreign multinationals over the last decade.

In a strongly-worded letter to the Financial Times, Mr Morgan, who retired as first minister in 2009 but remains a member of the Welsh Assembly, said the British chancellor George Osborne should secure corporate tax concessions from Ireland as part of the price for the UK’s willingness to offer £7 billion (€8.25 billion) or more in aid to Ireland.

“Ireland’s banks evidently fell into the ‘too big to fail but too stupid to succeed’ category, just like quite a few British banks. The issue is whether pan-European solidarity cuts both ways. Ireland’s hyper-competitive corporation tax rate has enabled it to sweep the board when it comes to attracting high profit, low capital spend foreign direct investment in sectors such as software, pharmaceuticals and so on,” said Mr Morgan, who has been friendly towards Ireland in the past, but who was deeply annoyed by the Government’s decision in 2009 to close its Consulate-General office in Cardiff.

“My experience was that Wales could not even get on the shortlist for many of those mobile investment projects. If Ireland had had a competitive tax rate, say of 20 per cent . . . projects . . . would have been distributed between Ireland, north as well as south, Scotland and parts of the north of England, and no doubt Wales would have picked up a few as well.

“The new UK coalition government recognised this problem shortly after coming into office by agreeing to look at the implications for Northern Ireland of trying to compete with the Republic’s 12.5 per cent rate,” said Mr Morgan as he outlined his criticism of Ireland’s corporation tax rate. His view is not, so far, shared by senior Labour Party figures in London, including shadow chancellor Alan Johnson.

Mr Morgan urged Ireland to raise its tax rate for its own needs. “What, after all, would happen if the whole of Europe went for a 12.5 per cent tax rate? Where would the tax receipts come from to bail out Ireland?” he asked.