Under the terms of an agreement in July between the Government and the European Commission, companies already paying 10 per cent corporation tax, either as exporters or IFSC-established, will continue to pay that rate until 2010 and 2005 respectively.

Companies currently paying 32 per cent will see their tax rate cut progressively to 12.5 per cent by the beginning of 2003 - with five budgets between now and then, an annual cut of 4 per cent in the corporation tax rate can be expected. In the rest of the EU nominal corporation tax rates tend to vary between 30 and 40 per cent. But the real rates are far lower because of some 80 tax break schemes operating across the Union which are currently being investigated by an EU working group on harmful tax competition.

Ireland rejects any idea of setting a minimum rate and is campaigning instead for greater transparency in the system.