IRELAND must raise corporation tax, Germany’s second biggest party has insisted as it prepared to enter serious coalition talks with Chancellor Angela Merkel.

"I’m very sorry for Ireland, but the corporate tax rate is simply to low,’’ SPD general secretary Andrea Nahles told reporters in Berlin.

The comments came after the German media reported last week that early coalition talks between the social democratic SPD and Mrs Merkel’s conservative CDU were snagged on Irish issues.

The SPD is also completely opposed to the direct bank recapitalisation of troubled European banks through a new bailout mechanism called the European Stability Mechanism.

Last week’s reports that the SPD wants Ireland to hike corporate tax sparked an angry response from Fianna Fail leader Micheal Martin who urged Tánaiste Eamon Gilmore to tell SPD leaders that “posturing on the future of Ireland’s corporation tax regime is unacceptable and must stop”.

Yesterday’s confirmation that the SPD wants Ireland to raise corporation tax came as governments around the world try to clamp down on corporate tax avoidance. The ability of US companies such as Apple, Google and Facebook to pay tiny amounts of tax relative to their income thanks to their Irisih operations has become a political football from London to Canberra.

Online Editors