Ireland’s Finance Minister Michael Noonan said yesterday that plans by France and Germany to work towards a common corporation tax did not represent a threat to his country’s controversial 12.5 per cent rate.

German Chancellor Angela Merkel and French President Nicolas Sarkozy announced plans to harmonise their countries’ corporation tax, or levies on companies’ profits, by 2013 as part of wider plans for greater integration after talks in Paris on Tuesday.

Mr Noonan said the decision would have no effect whatsoever on Ireland’s tax rate which is seen by his government as vital in attracting international industrial projects that drive exports and economic growth.

“Our corporation tax position is safe now, as safe as it ever was, at 12.5 per cent,” Mr Noonan told RTE state radio. He confirmed that earlier this year France put pressure on Ireland to change its corporation tax in return for an interest rate reduction on loans in a massive EU bailout.

“We didn’t give any ground on that so there is no threat now... our position is that the 12.5 per cent tax rate is fundamental to our industrial policy and we are not making any concessions.

“But of course we know this debate has gone on for years about tax harmonisation and if the French and the Germans go ahead and harmonise, that’s their business,” Mr Noonan said.

Last November, Ireland had to seek an €85 billion rescue package from the EU and the IMF as massive debt and deficit problems left the country on the verge of collapse.

Ireland, a member of the eurozone, has been severely battered by the international financial crisis.