Ireland: Business tax 'non-negotiable'

The country, which is facing years of austerity in return for billions of euros in financial aid, has come under heavy fire from other EU nations, who argue that the 12.5 per cent tax gives the country too much of an advantage in attracting overseas investment.

Its rate of corporation tax compares with 33 per cent in France, 30 per cent in Germany and a current 28 per cent in Britain.

Irish finance minister Brian Lenihan said the issue was an absolute "red line" while three other senior cabinet ministers insisted the tax rate was "non-negotiable".

The Republic's European minister, Dick Roche, said: "There has been some very unhelpful chatter in the background in the last few days about our corporation profit tax.

"Where would be the sense of destroying one of the great drivers of growth?"

The 12.5 per cent tax rate - the second lowest in the EU - was introduced in 1997.

It yielded €3.9 billion (3.4bn) in 2009 and is expected to bring in at least €3.1bn this year, about 10 per cent of government revenue. Each extra percentage point of corporate tax would raise roughly €300 million.

Prime minister Brian Cowen said the government was engaged in constructive talks with the IMF and Europe to secure the best outcome for the country.

An aid package is expected to emerge next week, according to sources. At the same time, the Republic is likely to outline a new four-year austerity programme.

"Talks that began are going well in terms of being open and constructive," Cowen said.

IMF officials, including banking experts and auditors, headed by Ajai Chopra, joined representatives from the European Central Bank and European Commission in poring over the state's books.

The audit began a day after Ireland's central bank governor Patrick Honohan exposed the feared extent of a potential bailout - tens of billions of euros.

Talks are focusing on a public sector savings plan and the financial black hole crippling Ireland's banks.