IRELAND’S CORPORATE tax rate led to “misallocations” that helped cause the country’s banking crisis, German Chanc-ellor Angela Merkel said.
While European Union countries should set their own corporate taxes, the EU should agree to limit them to a certain range, she told an audience in Freiburg, last night.
Her comments come as the German parliament is set to approve sweeping proposals to reinforce Berlin’s hardline negotiating position in Brussels, ruling out any European crisis response measures that involve buying government bonds or issuing loans to help debt-strapped governments buy back their debt.
The resolution, drafted by the government’s supporters, seems certain to be passed in the Bundestag on March 17th – one week before a European Union summit in Brussels that has to agree on a package of measures to head off any future crises in the euro zone. The issue of a common European corporate tax base is expected to figure in any final agreement.
Members of parliament insisted yesterday that they want to strengthen the German government’s position by setting strict red lines sending a clear signal to other EU members of Germany’s conditions for providing financial support to other countries.
“The coalition parties have laid down a framework that will strengthen the government for the difficult Brussels negotiations,” said Michael Meister, finance spokesman for the Christian Democrat Union parliamentary group.
The resolution sets out conditions under which the Bundestag would be prepared to approve EU treaty amendments to enable the planned European Stability Mechanism to be established from 2013.
In addition to rejecting bond-buying and buy-back arrangements, however, the Bundestag will also call for the rescue package to include an EU-wide financial market tax to reduce national budget deficits.
The resolution also includes a form of words intended to rule out issuing euro-denominated bonds to replace a portion of national sovereign debt, as proposed by many other EU members. – (Bloomberg The Financial Times Limited 2011)
