The discussions at European level on corporate tax harmonisation have all the signs of political posturing. Under pressure from their electorates, the French and German governments may be making noises about "unfair"` incentives elsewhere in Europe. And this week they even floated the idea of majority voting in the EU council on the issue, thereby removing the veto which has so far blocked any significant EUwide tax harmonisation moves.
Ireland, fortunately, has already done a deal with the Commission on the issue. And as all companies will be taxed at 12.5 per cent from early in the next century, there is no way that our EU partners can object that one sector is being favoured over another, or that we are offering particular incentives to get firms to set up here which are not on offer to indigenous industry. That said, while our tax deal looks safe, we will be able to offer a much lower level of grant aid to attract overseas firms to areas of the State which will lose Objective 1 status in the next round of EU funding. There is the real reason why the Government has decided to regionalise and try to retain Objective 1 status for parts of the State.
The extra £100 million involved in EU support is peanuts, but the ability to provide generous IDA grants for at least parts of the State is very significant in trying to hold our share of foreign investment into Europe. Whether this gamble pays off remains to be seen.