We need to stop obsessing about Brexit and stand up for our corporate taxation policy

EU CORPORATE tax harmonisation, Ireland’s never-ending headache, is once again front and centre of the political agenda in Europe. After many years of the EU jealously watching Ireland’s success on the (Foreign Direct Investment) FDI front, as we became the choice destination for US business in Europe, we now face multiple threats to our corporate tax policy. As a committed European who believes in more Europe and more integration to make the single market work more successfully, I have a simple message for those who still want a piece of our FDI success – Ireland stubbornly defends its right to set its own tax rates.

An important interview in last Saturday’s Irish Independent with Jean Claude Juncker should mean that we have nothing to worry about. The European Commission President made it clear that the principle of unanimity applies to all decisions on taxation taken by the EU, as set out in the treaties. Our consent, like the consent of other member states, must therefore be respected. However, despite what he has said recently, and despite the legal position, we still must be vigilant and work with other member states who equally want to defend their positions.

While President Juncker’s remarks were intended to appease an Irish audience, his political message to the broader European audience struck a different tone. His State of the Union address, accompanied by his letter of intent to the member states and the European Parliament, made clear that he wants the EU’s Common Consolidated Corporate Tax Base proposal (CCCTB) agreed and signed off before the end of 2018. He wants new rules on how the EU deals with FDI and a new method of taxing digital companies such as Google, Facebook and Apple, all of which have their headquarters in Ireland, and pay their taxes here.

Different member states are lining up to take their slice of Ireland’s FDI pie. But this is nothing new. The then French president Nicolas Sarkozy made it evidently clear during the bailout negotiations that France wanted Ireland to hike corporate tax rates in exchange for EU bailout funds.

Back then, the country was on its knees and we needed whatever help we could get. But Enda Kenny held firm and, to be honest, that was the EU’s best chance at stripping away

our corporate tax regime and it missed it.

We have the unanimity principle for deciding on tax issues in the European Council and we have allies – for example in the Scandinavian, Benelux and Baltic countries – so the EU has very little power to go after our 12.5pc rate.

But that doesn’t mean that we aren’t facing political headwinds that need to be battled.

There will be various attempts in the coming years to try to influence Ireland’s corporate tax regime, but we have to uphold our strong sense of tax sovereignty.

The battle on corporate tax policy should be a wake-up call that we need to stop obsessing with Brexit and get on with the day job in Europe. The truth is that our political system is feasting out on Brexit every day. It’s the story that won’t stop giving. It means that we are taking our eye off the ball on other EU issues that are just as significant to Ireland’s future.

We ignore at our peril possible future developments in the EU and especially for the eurozone.

IN Juncker’s State of the Union address, he announced other grand, but potentially dangerous, ideas like a new eurozone finance minister and a new eurozone budget. These proposed reforms have the potential to redefine our economic decisionmaking and, I would argue, are not in Ireland’s interest.

I don’t see many people on the streets calling for a new eurozone finance minister or for giving the eurozone a new budgetary purpose, which would ultimately be funded through European taxpayers. We have already put in place plenty of economic reforms since the crisis; now is not the time for a raft of new

Member states are lining up to take a slice of Ireland’s FDI pie

reforms. It’s actually time to take stock of what has been done since the crisis and make sure the rules are working properly.

In any case, the immediate concern is an attempt to water down our right to set our own corporate tax policy. It may be that a group of EU countries will proceed on their own on a so-called ‘enhanced co-operation’ level to define their own harmonised tax rules, as happened with the Financial Transactions Tax. Even still, this would represent a major new departure.

Europe is not going to fully recover by moving ahead of the international community and the OECD on corporate tax policy. Much has been achieved in clamping down on aggressive tax planning by the largest of multinationals, and much more remains.

I fully recognise the reputational damage done to Ireland with schemes like the ‘double Irish’.

Thankfully, we have cleaned up our tax code and now work with the EU and the OECD in demanding more tax fairness. But driving investment out of the EU is not a clever policy and needs to be resisted. It’s bad for investment and bad for Europe’s comeback.