Threat To Irish Policy As Common Tax Base Back On EU Agenda: Sunday Business Post

free-man

It seems we may have been too hasty in agreeing with the yes side on there being no possibility of a threat to Irish Corporation Tax policy

Threat to Irish policy as common tax base back on EU agenda
03 January 2010 By Pat Leahy Political Editor

The introduction of a common tax base for businesses in the European Union is likely to be proposed early this year when the new European Commission takes office.

Moves to establish the common tax base were suspended after the defeat of the first Lisbon referendum in Ireland. The harmonisation of taxes was one of the issues at the centre of the referendum campaign.

The Irish government has repeatedly stressed its opposition to the establishment of such a ‘common consolidated corporate tax base’ (CCCTB), claiming that the measure would undermine the state’s independence in tax matters.

The CCCTB would introduce common rules about what profits were taxable in the EU and where, and which costs could be offset against tax bills. The move is opposed by the government, which believes that this would harm Ireland’s tax competitiveness and damage the attractiveness of the country for foreign direct investment, particularly from the US. However, other governments, especially those who believe Ireland’s low corporate tax rates constitute unfair competition, are in favour of the move.

High-level sources in Brussels say the common tax base is ‘‘virtually certain’’ to be put back on the agenda this year.

The attitude of the incoming European commissioner for taxation, Lithuania’s Algirdas Semeta, to the proposal is not yet clear. One source says that, while the Lithuanians were allies of the Irish government in its efforts to block the proposal - and Semetas is a former finance minister of that country - the civil servants of the taxation directorate in the European Commission are likely to push for the measure’s inclusion on the new commissioner’s agenda.

On January 12, Semetas will face questioning from MEPs on the Economic and Monetary Affairs committee, which includes Fine Gael MEP Gay Mitchell as a substitute member.

The CCCTB proposal dates back to 2001, and a working group has been pushing ahead with the proposal since 2004, despite the objections of Ireland and other member states. The group has produced an outline of how the common tax base might work.

One proposal suggests a formula for deciding what proportion of a company’s tax should be paid in which country. Ireland objected to this proposal in particular, because the formula suggested that some profits would be taxed in the country where products were sold, rather than where the company is based. This would work to the advantage of the large markets.

The introduction of a common tax base would require unanimous approval by member states. While Ireland and several other countries remain completely opposed, a smaller group of countries could proceed with such a plan under the enhanced co-operation procedures.

The president of the European Commission, Jose€ Manuel Barroso, confirmed this was possible in an interview with this newspaper last year.

And from the Irish Times back in January 2009:
EU Shelves tax plan for fear of unsettling Irish voters.

And my post, showing my concerns that Ireland would be pressurized if Lisbon II was passed.

It remains to be seen, however perhaps the No side were too quick to listen to the oppositions smooth assurances that this would never happen

free-man wrote: »

Now to give some perspective.

I used to be of the opinion that Lisbon allows Europe to influence our tax rate. The article that everyone is worried about clearly relates to indirect tax which does not mean corporation tax - thanks to the posters here

This doesn't mean I am not concerned. Judging by the way our government is selling us out with the developers etc it is not too hard to see all of Europe voting for Ireland to increase their tax and the government going along so as not to lose 'influence' or so we can remain 'at the heart of europe' or so it will 'create jobs'.

I'm still not entirely convinced that there is not a legal loophole somewhere in the treaty on the tax matter.

A good blog I have been following is here:

The issue of the Corporation Tax rate and of a Common Consolidated Corporate Tax Base is absolutely crucial to Irish jobs.

nesf

Key part of that article:

The introduction of a common tax base would require unanimous approval by member states. While Ireland and several other countries remain completely opposed, a smaller group of countries could proceed with such a plan under the enhanced co-operation procedures.

Some states can decide to implement it themselves but they cannot force other countries who don't want to implement it to implement it. Or in other words, Ireland and other countries have a veto against bringing in CCCTB in their countries. We can't however stop say Germany and France deciding that they want to implement it but this wouldn't affect our tax policy.

free-man

nesf wrote: »

Key part of that article:
Some states can decide to implement it themselves but they cannot force other countries who don't want to implement it to implement it. Or in other words, Ireland and other countries have a veto against bringing in CCCTB in their countries[/]. We can't however stop say Germany and France deciding that they want to implement it but this wouldn't affect our tax policy.

Yes but you saw what happened with Lisbon II, what with Ireland being isolated and the arguments that we need to stay in with Europe etc etc.

Are you suggesting that Ireland will never cede to pressure on this issue?

nesf

free-man wrote: »

Yes but you saw what happened with Lisbon II, what with Ireland being isolated and the arguments that we need to stay in with Europe etc etc.

Are you suggesting that Ireland will never cede to pressure on this issue?

You can't really compare the Lisbon Treaty that we negotiated and agreed with at Governmental level and a policy that we didn't negotiate and that we've opposed since day one. All our politicians from the major parties were in favour of Lisbon, none of them are in favour of CCCTB. It's just not comparable.

free-man

nesf wrote: »

You can't really compare the Lisbon Treaty that we negotiated and agreed with at Governmental level and a policy that we didn't negotiate and that we've opposed since day one. All our politicians from the major parties were in favour of Lisbon, none of them are in favour of CCCTB. It's just not comparable.

Ok but you didn't answer the question...

nesf

free-man wrote: »

Ok but you didn't answer the question...

I challenged the premise of your question, i.e. I don't think your question is valid. Do we have an example of a country being forced to cede on such an issue where they publicly and clearly oppose it?

Scofflaw

nesf wrote: »

I challenged the premise of your question, i.e. I don't think your question is valid. Do we have an example of a country being forced to cede on such an issue where they publicly and clearly oppose it?

...and are supported by several other countries?

Almost irrelevantly, I'll just point out that nothing changed the CCCTB picture in Lisbon. CCCTB was on the agenda before Lisbon, and finding it on the agenda after Lisbon should come as no surprise to anyone who knows what an agenda is.

Unless...no, it couldn't be...but perhaps...well, I suppose I have to ask - surely (and I'm sure there can't be) there isn't anyone dim enough to believe that CCCTB could be derailed by Ireland continuing to say No to Lisbon? We all recall that Lisbon contained nothing relevant to CCCTB, right? That both the ability to create something like CCCTB and the enhanced cooperation mechanism pre-date Lisbon by one or two treaties? We all remember all that, right? So once Lisbon was off the table (as it would have been after a second No, since Klaus wouldn't have folded, and the Tories would have run their referendum), there would have been no Irish 'bargaining power' relating to Lisbon?

cordially,
Scofflaw

free-man

nesf wrote: »

I challenged the premise of your question, i.e. I don't think your question is valid. Do we have an example of a country being forced to cede on such an issue where they publicly and clearly oppose it?

Let me give more context:

I ask the question notwithstanding the below:

a. CCCTB could have gone ahead in enhanced co-operation mode prior to Lisbon

b. The Lisbon treaty allows for a "veto" from Ireland in principle*

c. The plans were shelved around the time of Lisbon II voting and now resurrected after Lisbon II.

* The reason I say in principle is because of the ability of Europe to portray Ireland as being isolated in it's resistance (Lisbon II) and the fact the only thing keeping the country afloat right now is a credit note from the ECB - that's quite a bargaining chip!

So I ask again:

Are you suggesting that Ireland will never cede to pressure on this issue?

PopeBuckfastXVI

free-man wrote: »

Are you suggesting that Ireland will never cede to pressure on this issue?

You're asking people to predict an awful lot of future here.

Might an Irish government in the future agree a common tax system? Perhaps.

Does it relate in any way to the Lisbon treaty? No.

Build a bridge...

free-man

PopeBuckfastXVI wrote: »

You're asking people to predict an awful lot of future here.

Might an Irish government in the future agree a common tax system? Perhaps.

Does it relate in any way to the Lisbon treaty? No.

Build a bridge...

In my opinion what it is to do with Lisbon is that it was a great bargaining chip for us to ensure we got a protocol dealing with taxation so we could be 100% clear our tax position would not be compromised.

Sure it has nothing specific to do with the Lisbon text but it was a great time to leverage Lisbon II to get a protocol on this.

Now (without this protocol) either it's not entirely unlikely the government will cave due to pressure from the ECB or 'last man standing' argument

OR countries will plow ahead with CCCTB under enhanced co-operation and Irish exporters will need to pay this higher rate rendering our low corporation tax useless, any challenges to this would be decided in the ECJ.

Leaving aside the 2nd potential scenario we have lost a huge bargaining chip and I'm not sure why we didn't use it as a chance to get a protocol in this area.

PopeBuckfastXVI

free-man wrote: »

In my opinion what it is to do with Lisbon is that it was a great bargaining chip for us to ensure we got a protocol dealing with taxation so we could be 100% clear our tax position would not be compromised.

Sure it has nothing specific to do with the Lisbon text but it was a great time to leverage Lisbon II to get a protocol on this.

Now (without this protocol) either it's not entirely unlikely the government will cave due to pressure from the ECB or 'last man standing' argument

OR countries will plow ahead with CCCTB under enhanced co-operation and Irish exporters will need to pay this higher rate rendering our low corporation tax useless, any challenges to this would be decided in the ECJ.

Leaving aside the 2nd potential scenario we have lost a huge bargaining chip and I'm not sure why we didn't use it as a chance to get a protocol in this area.

We have a veto, what more of a 'bargaining chip' do you need? Suppose we begged our partners to introduce a law forbidding Ireland from joining a common tax system, and then we elected a government that wanted to, we'd have to renegotiate the whole shooting match, for what, to do something we are forbidden from doing even though it's something that we never had to do in the first place, as we had a veto, i.e. could make our own minds up, all along?

Get real.

We've also moved far beyond what the 'yes side' promised, as per your first post, so really you don't have a problem with anything in Lisbon, and now are complaining there wasn't actually enough there. Again, nothing to do with what the 'yes side' promised about threats. Be careful you don't hurt your back moving those goal posts now.

Stark

Will the UK ever cede to pressure to join the Euro? Maybe, maybe not.

Scofflaw

free-man wrote: »

In my opinion what it is to do with Lisbon is that it was a great bargaining chip for us to ensure we got a protocol dealing with taxation so we could be 100% clear our tax position would not be compromised.

Sure it has nothing specific to do with the Lisbon text but it was a great time to leverage Lisbon II to get a protocol on this.

Now (without this protocol) either it's not entirely unlikely the government will cave due to pressure from the ECB or 'last man standing' argument

OR countries will plow ahead with CCCTB under enhanced co-operation and Irish exporters will need to pay this higher rate rendering our low corporation tax useless, any challenges to this would be decided in the ECJ.

Leaving aside the 2nd potential scenario we have lost a huge bargaining chip and I'm not sure why we didn't use it as a chance to get a protocol in this area.

Probably because CCCTB was one minor issue amongst many. That's the long-term weakness weakness (and short-term strength) of the No side - people who support the Treaty all support the same Treaty, while people who oppose it do so based on a multiplicity of reasons, none overwhelming. That makes it almost impossible to use the No as a 'bargaining chip' as you suggest, even if that idea didn't already suffer from other flaws.

cordially,
Scofflaw

oncevotedff

nesf wrote: »

Some states can decide to implement it themselves but they cannot force other countries who don't want to implement it to implement it. Or in other words, Ireland and other countries have a veto against bringing in CCCTB in their countries. We can't however stop say Germany and France deciding that they want to implement it but this wouldn't affect our tax policy.

Kind of like we had a veto on the Lisbon Treaty?

Scofflaw

oncevotedff wrote: »

Kind of like we had a veto on the Lisbon Treaty?

No, in fact nothing like that. One is a veto on the Council of Ministers, the other was a referendum on ratification of a Treaty. The former is exercised in private by the Irish government, the latter is determined by a public vote.

We've had vetoes on various European level issues for years - by and large we don't use them (and nor does anyone else), but that's because it's very rarely an issue. Referendums on EU treaties, on the other hand, we're legally obliged to hold, according to our Constitution.

cordially,
Scofflaw

free-man

PopeBuckfastXVI wrote: »

We have a veto, what more of a 'bargaining chip' do you need?

The reasons I outlined above.

PopeBuckfastXVI wrote: »

Suppose we begged our partners to introduce a law forbidding Ireland from joining a common tax system, and then we elected a government that wanted to, we'd have to renegotiate the whole shooting match, for what, to do something we are forbidden from doing even though it's something that we never had to do in the first place, as we had a veto, i.e. could make our own minds up, all along?

Slightly over-complicating it. What I'm saying is yes we have a veto but we wasted a chance to have a protocol protecting Ireland's corporate tax position.

Some argue that the Government will never be swayed to go with the herd while others are not so sure given how politicians can be easily influenced.

PopeBuckfastXVI wrote: »

We've also moved far beyond what the 'yes side' promised, as per your first post, so really you don't have a problem with anything in Lisbon, and now are complaining there wasn't actually enough there.

I never said I didn't have a problem with anything in Lisbon. What I am saying is we should have secured a protocol on protecting Ireland's taxation for the reasons mentioned above now that CCCTB is back on the agenda.

free-man

Scofflaw wrote: »

Probably because CCCTB was one minor issue amongst many. That's the long-term weakness weakness (and short-term strength) of the No side - people who support the Treaty all support the same Treaty, while people who oppose it do so based on a multiplicity of reasons, none overwhelming. That makes it almost impossible to use the No as a 'bargaining chip' as you suggest, even if that idea didn't already suffer from other flaws.

cordially,
Scofflaw

I disagree with your logic that just because there is a multitude of reasons why people were opposed to it doesn't make them any less important for those people.

That said don't really want to get into Yes vs No. It's passed and I've dealt with that. I'm just concerned really about the CCCTB raising it's ugly head again.

Scofflaw

free-man wrote: »

I disagree with your logic that just because there is a multitude of reasons why people were opposed to it doesn't make them any less important for those people.

That said don't really want to get into Yes vs No. It's passed and I've dealt with that. I'm just concerned really about the CCCTB raising it's ugly head again.

I appreciate they're important for the people they're important to, but there was no chance of the No campaigns agreeing on CCCTB as the single issue they would hold out on - and therefore no way of using Lisbon as a bargaining chip against CCCTB.

To do that the No campaign would largely have had to be a campaign against CCCTB, and to pull the public on board on that issue, so that it became clear that there would be no assent to Lisbon without a bar on CCCTB. Nothing even remotely similar happened - CCCTB was just another stick to beat Lisbon with. No chance was wasted - there was no such chance. CCCTB will have to be opposed through normal channels, rather than political brinksmanship.

cordially,
Scofflaw

View

Stark wrote: »

Will the UK ever cede to pressure to join the Euro? Maybe, maybe not.

Pressure? What pressure?

In case anyone missed it staying out of the Euro has done very little, if anything, to either insulate the UK from the current recession or to help their recovery. In fact, in terms of recovery, the UK is lagging its peer group of the major EU economies.

Indeed, to quote the UK's H.M. Treasury's website on the Euro:

Government Policy on Membership of the Single Currency
...
In principle, we are in favour of UK membership of EMU, in practice, the economic conditions must be right.

as can be seen here: http://www.hm-treasury.gov.uk/euro_index.htm