Martin Mansergh (Tipperary South, Fianna Fail)

The current corporation tax rate reflects the evolution of policy over 50 years. If I recall correctly, export sales relief was introduced by the interparty coalition in the mid-1950s in the form of a tax exemption for exporting companies. Subsequent to our entry to the EEC, it became a 10% rate in 1980. Questions later arose about whether the rate discriminated between companies and in May 1997, the then Minister for Finance, Deputy Quinn, announced the aim of the 12.5% corporation tax rate. That aim was not achieved for five or six years because the rate for indigenous companies had to be reduced from its original rate of approximately 20%.

Given that we gained EU approval for our approach in 1998, nobody can describe it as unfair competition. Over its 50 year lifetime, the policy has in fact seen increases rather than decreases. It is a cornerstone of our very successful industrial policy. In the 1950s, Ireland was perceived as an overwhelmingly rural and non-industrialised country. With the advent of the Single Market and the eurozone, our corporation tax rate has been one of the principal means of catching up with and possibly overtaking average EU living standards. It has enhanced our competitiveness and is a cornerstone of initiatives like the IFSC.

During the past two or three years, our exports to the US were greater than to Britain. My favourite historical quotation is the following statement by Thomas Addis Emmet to a parliamentary committee in 1798: "America is the best market in the world, and Ireland the best situated country in Europe to trade with that market."

We are at present speaking about a headline rate. Other countries with ostensibly higher taxation rates may in fact have lower effective rates but skilled accountants are required to take advantage of their complicated and voluminous tax books. The Minister of State, Deputy Dara Calleary, described the 12.5% rate as a key compensator for regional disadvantage. The City of London, for example, does not need a tax rate of 12.5% because it already attracts significant financial investment. Similarly, the German economy has many compensating factors as one of the world's leading exporters.

People have asked what harm would be caused by increasing the rate by 2.5%. However, the central issue is not whether companies could bear a higher rate but if faith in this country would diminish. During the mid-1970s I was posted to Germany, where one of my duties was economic reporting. During my time in that country I realised the importance of reliability and trust. When a Government commits to a policy, it must stick to it. This is particularly true in the area of tax and investment. I have heard through private sources information that there would be firms, high profile ones at that, which would leave the country very quickly if they could not rely on the public faith we have committed to the tax rate.

This was copper-fastened in the Lisbon treaty. If there are officials in other countries who look enviously on this, particularly in the most prosperous and successful countries, I urge on them the moderation that has served them so well - I am thinking in particular of Germany's position in recent decades. It would be very damaging to its interests, let alone ours, to try to press a temporary advantage so as to take the floor from underneath our economy. I am sure that on reflection neither its Government nor any other Government will want to do something that, in the final analysis, as we are all part of the one eurozone, would only compound the problems of other countries as well.

See this speech in context