Tax remains a thorny issue for Ireland at EU leaders’ summit

EU leaders in Tallinn on Friday night gave broad support to an Estonian agenda that aspires to establish the union's global leadership of the digital economy and the completion within a year of the digital single market.

But their unanimous support for measures such as building a 5g infrastructure and enhancing cybersecurity co-operation did not extend to how to tax the digital giants.

"We're not there yet," Estonian prime minister Juri Ratas admitted to journalists at the Digital Summit's final press conference.

Pressure to overcome the vetoes of member states over tax issues has gained a new momentum, to Ireland's discomfort. At some point the Irish Government may have to calculate the political cost of continuing to exercise its veto at a time when it is also appealing to fellow member states for unflinching solidarity over Brexit.

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Following French president Emmanuel Macron's strong championing of corporation tax harmonisation in his speech last week, the idea was also backed by German chancellor Angela Merkel on the fringes of Tallinn, while commission president Jean-Claude Juncker insisted it must happen. "Tax has to be paid where it is due, whether online or offline," he told the final summit press conference.

Rearguard action

Taoiseach Leo Varadkar was fighting a rearguard action. Addressing the leaders' dinner on Thursday night, he told EU leaders "that if we want to foster innovation and Europe to become a digital leader, the solution is not more taxes and more regulation – it's actually the opposite.

"And if people bemoan the fact that there is no European Google or European Facebook or European LinkedIn, my view is that if you want those companies to generate in Europe it will not be through heavy taxes and more regulation that you will achieve that."

The leaders also returned to the issue in their debates on Friday afternoon.

Mr Varadkar told journalists that Ireland had significant support for its position from the Nordic and Benelux countries, but Belgian prime minister Louis Michel was clearly not on-message. Speaking to Flemish journalists on Friday night, he bluntly said: "We need more harmonisation, either within the OECD or the EU.

‘Future strategy’

“I am not naive, I know that some European nations are reticent. Because, now, within a short timeframe, it profits them, but it is a short-term vision. If we need a future strategy, we need to look at more harmonisation.

“I call for a balanced and just level of taxation for everyone. An SME here pays taxes. It seems only correct that very large internet companies contribute at a European level.”

The informal summit also, however, gave the nod to the council president, Donald Tusk, to prepare for the summit late in October what he called a "Leaders' Agenda 2017-18", an ambitious action plan for the reform of the union and specifically the euro zone, based largely, he said, on a discussion at the dinner which focused on the recent speeches made by Mr Macron and Mr Juncker.

There will undoubtedly be important strategic choices for Ireland.