Will there be a price to be paid by Ireland for the backstop?

German industry boss hints at inevitable move towards tax harmony in Europe

Might a compromise on corporate tax be the price of the backstop? Photograph:   Stefan Rousseau/PA Wire

Might a compromise on corporate tax be the price of the backstop? Photograph: Stefan Rousseau/PA Wire

 

The European Union’s support for Ireland and the backstop in the Brexit negotiations has been unwavering, contrary to initial forecasts that the other member states would not hold to a common position.

Fears that the Border insurance policy would be jettisoned or watered down at the last minute, at the behest of European business, to facilitate a deal with the United Kingdom have so far been misplaced.

In Dublin yesterday Joachim Lang, the head of the Federation of German Industries (BDI), the country’s equivalent of Ibec, said German business was steadfast behind the backstop and would not support any time limit attached to it.

“Despite all noise, all the time pressure, and all the immense challenges for businesses” this stance would not change, he said, noting it was fundamental to preserving the integrity of the single market and peace on the island of Ireland.

The big question is how much political capital Dublin has spent in keeping its European allies on side in the Brexit negotiations and whether we might have to yield in another area.

Sacrosanct

At the same event, Lang talked about how multinational tax avoidance was driving anti-establishment populism across Europe and how there would have to be some unified response. This is code for co-ordination on corporate tax, a move that is vehemently opposed by Ireland, which sees its special 12.5 per cent headline rate as sacrosanct.

The European Commission’s proposed Consolidated Common Corporate Tax Base, which would see large firms pay corporation tax proportionate to where their sales, staff and headquarters are located, could wipe out half of our €10 billion corporate tax base, according to certain estimates.

While the BDI and Germany were against recent French moves to unilaterally impose a digital sales tax on big US tech companies, Lang said many Germans were sympathetic to the proposals.“If we do not want to see more of these national answers to tax evasion we need to come to a European conclusion,” he said. Might a compromise on corporate tax be the price of the backstop?

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