EU and corporate tax regime
Sir, – In her article on the French official assault on Ireland’s corporate tax regime, Lara Marlowe quotes from a report by the Paris-based Jacques Delors Institute, which claims that Ireland’s receipt of EU structural funds has enabled this country to offer a low corporate tax rate (“French look intent on pursuing EU tax harmonisation”, Business News, September 25th).
That assertion is highly questionable.
For over a quarter of a century, Ireland’s corporate tax revenues relative to GDP have been larger than France’s, and before that were not much more than 0.5 per cent of GDP lower.
This is incompatible with the idea that the structural funds financed Ireland’s low corporate tax rate. In fact, as is often the case in public finance, Ireland discovered that the lower the rate, the higher the take.
The Irish corporate tax regime has powered Ireland’s ascent out of the ranks of those who need EU funds to the status of a net contributor to the EU budget. That means that going forward Ireland will ultimately pay more than it receives from such initiatives as the EU €750 billion Covid recovery fund, cited by the Jacques Delors Institute as an act of EU solidarity that requires tax harmonisation among member states.
In debates on the issue of Ireland’s company tax regime, there is often the claim – and there is an inference of it in the institute’s report – that Ireland somehow “owes” the EU for the structural funds. If the funds did create debts, whether legal, political or moral, they were more than paid off in 2011 when the European Central Bank (headed at the time by a French national) insisted that Ireland should repay all of the Irish banks’ creditors (thought to be mainly French and German interests).
The error of letting creditors off in financial crashes like this has been long recognised by the IMF. At the time it urged that some at least of the €60 billion involved in the Irish case should be shouldered by these creditors. The error was recognised subsequently by the EU, which now makes this kind of “bailing in” a standard feature of any future systemic financial rescues. Too late for the Irish taxpayer.
Finally, the proposal from a French official, also cited in Lara Marlowe’s article, that the EU should bend the rules to get around article 116 of the Treaty on the Functioning of the European Union, which enshrines tax autonomy, smacks more than a little of the sort of manoeuvres recently seen in our nearest neighbour. At least the British made no bones about their readiness to break an agreement already made. Usage of EU gobbledygook like “passerelle” should not be allowed to obscure the fact that something similar is afoot in Europe. – Yours, etc,