EU coronavirus aid plan calls for fancy footwork from Ireland if we are to avoid tax downside

AGOOD definition of a pessimist is to speak of somebody who, when gifted a doughnut, sees the hole in it – not the mass of sugar-coated dough.

Hold that thought as we look through an Irish prism at the EU policy-guiding Commission finally tabling a ground-breaking €750bn plan to help stave off post coronavirus economic collapse.

From this on, Ireland’s aim must be to maximise EU post-cornonavirus aid, while also dialling down the pitfalls in the accompanying terms and conditions – most notably further Brussels moves on corporate tax.

But let’s cite a few positives first. It is very significant that Germany has broken a long-standing taboo about the European Union itself borrowing vast sums and showing a move towards member states shouldering the global bloc debt.

The plan – yet to be agreed by member government – provides for unprecedented non-repayable grant aid for the worst hit Italy, set for €82bn, and Spain €77bn. Scaled back to population size and virus damage done, Ireland is in line for a creditable €2bn in grants and various other supports in low-interest loans that might or might not be worth taking up.

If things go to plan, much of the money will be frontloaded in the years 2021 and 2022, hopefully a time when we shall be moving towards “a new normal” and some badly needed economic stimulus. So far this country has motored well in borrowing at historically low interest rates on world money markets to keep things motoring. But if things change, we may again be grateful for a Brussels’ loan facility.

Let’s go back to our classic pessimist at this stage and ask: What’s the catch?

Since you get nothin’ for nothin’ in the political world, there are potential snags. The first centres on how will this ground-breaking aid plan be ultimately funded?

The commission’s answer is that member states should create taxes and levies, and on-pass revenue to Brussels as so-called “own resources”. That also implies a shift where the EU engine, the commission, would have more reliable funding sources.

In the Brussels’ crosshairs are import levies on carbonintensive goods, taking a chunk of the emissionstrading scheme, and levies on companies that benefit from the EU single market. Watch especially for revival of a longplanned tax on tech giants, such as Google and Facebook, which have a huge presence in Ireland.

No, this absolutely does not mean Ireland will get no coronavirus recovery grants unless it concedes a considerable advantage in attracting multinational investment. Nor do these EU proposals mean the jig is up on Ireland’s multinational incentives.

But it all does mean another twist in an ongoing political contest of attrition. The Irish

government that ends up managing this one faces the biggest challenge since the departure of the UK, which was our biggest EU tax ally.

Two years ago, in the wake of Brexit, Ireland lined up with seven other member states, the Netherlands, Sweden, Finland, Denmark, Estonia, Latvia and Lithuania, to pursue a liberal market agenda. But in the battle to set up an EU coronavirus fund, Ireland took a step back from this club within a club and threw in its lot with aid advocates including Italy, Spain and France.

It is clearly time for Ireland to look about again at those potential alliances. It may even be time to slope back to those north Europeans who traditionally dug their heels in when asked to accept new EU revenue sources.

But Ireland will be operating in a different world where all member states’ finances are under even greater pressure. The alternative to refusing Brussels more own financial resources would be tighter EU budgets in future. This one calls for some very fancy footwork. This one won’t be easy.