The Irish Times view: A veto worth keeping

Ireland may have to give ground to retain our corporate tax rate amid EU reforms

Minister for Finance Paschal Donohoe has slapped down a proposal from the European Commission to abolish national vetoes on EU taxation policy. Photograph: Nick Bradshaw

Minister for Finance Paschal Donohoe has slapped down a proposal from the European Commission to abolish national vetoes on EU taxation policy. Photograph: Nick Bradshaw

 

Minister for Finance Paschal Donohoe wasted no time in rejecting the European Commission’s blueprint to end national vetoes on major tax issues and replace it with qualified majority voting. “Ireland does not support any change being made on how tax issues are agreed at EU level,” he said.

Setting corporate tax rates is a national competence and not one that Ireland will give away lightly, given that our 12.5 per cent rate is a central part of our offering to lure multinationals to invest here. Successive governments have made it clear to investors that this rate would not be increased.

Last year the exchequer netted a record €10.4 billion in corporation tax, largely from foreign multinationals. Commissioner Pierre Moscovici presented his plan as a “gradual transition to more efficient and democratic decision-making in EU tax policy”, arguing that it would be a more efficient system and combat tax fraud. In reality, this is another push by France to harmonise corporate tax, and to end the advantage that jurisdictions such as the Republic and Hungary enjoy.

Unanimous voting procedures on EU tax policy have meant commission proposals for a common consolidated corporate tax base from as far back as 2001, and a 2011 financial transactions tax plan, ran into the sand. A commission move last March to introduce a digital tax – levied at 3 per cent on EU-based digital sales of multinational companies – has been opposed by the Republic, Sweden and Denmark. Germany is also cautious.

Ironically, the Republic would have a veto on Moscovici’s proposals were they ever to be put to a vote, which seems unlikely. The current commission is due to be replaced in November and there is little chance of French president Emmanuel Macron giving Moscovici another term.

That won’t make the issue go away. The next commission and France will inevitably return to it in some form or other. The ground is shifting internationally and in a bid to hold on to our 12.5 per cent headline rate, the Government is likely eventually to have to give ground on some elements of policy.

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