Ever since the European Union broke new ground by jointly borrowing €750 billion for an economic stimulus fund during the Covid-19 crisis, there has been discussion about how to pay it back.
The European Commission has proposed ideas for a range of new levies that would allow it to directly raise money to repay the loans, which are due to be repaid between 2028 and 2058.
Ireland has a veto on all of them, as each requires the unanimous agreement of all 27 EU member states.
The idea of a national contribution based on corporate profits was laid out in June in a review of the EU’s budget, alongside other proposals to raise money through the trading of emissions permits and a levy on non-EU imports made with high carbon emissions.
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Known by the acronym CPOR, the contribution would be paid by EU member states based on statistical data on the national gross operating surplus in financial and non-financial corporate sectors – the profits reported by businesses after their costs are deducted.
These figures, which are already reported to Eurostat by national revenue bodies, would serve as a “proxy indicator for corporate profits and as a viable basis for determining a national contribution”, according to the commission.
All EU countries would contribute 0.5 per cent of this gross operating surplus as their CPOR contribution, which the commission has estimated would raise €36 billion across the EU annually.
According to the Central Statistics Office, Ireland’s total economy had a gross operating surplus of €293.19 billion in 2021. If the levy applied to this entire figure, Ireland’s contribution would be €1.46 billion.
Because of the huge corporate profits booked in Ireland due to the presence of multinational companies, this contribution would be expected to be proportionately large within the EU compared with the size of the population.
The proposal has raised hackles in Dublin because Ireland is already a net contributor to the EU budget, and was one of the smallest beneficiaries of EU Covid-19 stimulus funds. (These were distributed based on the impact of the pandemic and underlying vulnerability of economies; Ireland was not due much, as it has consistently been the fastest-growing economy in the EU.)
On the other hand, Ireland became a net contributor to the EU only in 2013 and before that was a significant recipient of EU funds – and proponents of the proposal may argue that it is Ireland’s turn to contribute now.
The Irish Government’s resistance to the proposal is unsurprising, as it has a long history of fierce resistance to EU proposals that could affect or impinge upon its corporate tax policies, which are viewed highly critically by several member states.
The proposal will become reality only if the Government agrees, because all such decisions require the unanimous agreement of all 27 EU member states.
The commission has said the levy would be temporary, and would be ultimately be replaced by a new, similar contribution based on a proposed reform to synchronise corporate tax practices across the EU called Befit, which was laid out on Tuesday.
In a statement, the Department of Finance said Ireland’s position has long been that the EU’s funding model “works well as it is” and that Ireland was among various member states to express concerns about the proposals as they began to be discussed this summer.