MINISTER FOR Finance Brian Lenihan has said that a No vote on the Lisbon Treaty would amount to a "step into isolation" for Ireland and damage the economy at a challenging economic time.
He also denounced claims by the No campaign that Ireland would be unable to defend its strategic tax interests under the new EU treaty as "scaremongering" and "fanciful".
Addressing the EU American Chamber of Commerce in Brussels yesterday, Mr Lenihan said "Ireland's veto over any EU proposals in the taxation area remains" adding: "I do not think it is possible to be more unequivocal than this."
He took issue with two specific arguments used by opponents of the treaty that a clause allowing for further integration among a group of member states in tax issues, as well as the European Court of Justice, could force the State to change its corporate tax regime.
"Enhanced co-operation," which was already enshrined in current EU law, "would only be binding on those member states that participate in such co-operation and would be directly applicable only in those member states".
Mr Lenihan said the EU's court could not force changes to the corporate tax regime on grounds of distorting competition because the particular treaty article concerned indirect tax only and member states had to act unanimously "even in this specific area".
"Let us be clear: the No campaign is simply wrong on the issue of tax sovereignty," he said.
The Minister, who was in the EU capital for the first time since taking on his new post, also claimed that "a very significant number of member states oppose the introduction of . . . a common consolidated corporate tax base".
He noted that the commission was currently making an "economic impact assessment" of such a tax base and a decision on whether to make a formal legislative proposal to member states would only be made after the assessment had been completed "later this year".
EU tax commissioner Laszlo Kovacs strongly favours the idea of creating a single system for calculating company taxes across the 27 member countries, arguing it would cut red tape, but Ireland, with its low corporate tax rate of 12.5 per cent, has been at the forefront of states opposing the move.
There has been some speculation that countries such as France, which is set to raise the issue during its EU presidency in the second half of this year, would then seek to push ahead with a small group of states.
However, Mr Lenihan noted that enhanced co-operation had "never before been used and could be highly divisive" within the EU.
After attending his first EU finance ministers meeting, Mr Lenihan said Ireland could not prevent other states from moving ahead on their own. But he said he did not believe a group of EU states would in the future move ahead on their own in the tax field.