Wednesday, 9 April 2008

Ireland in tailspin over EU tax pledge

EUOBSERVER / BRUSSELS – Ireland has been sent into a political tailspin by France’s announcement that it is to push ahead with plans for a harmonised company tax base. Politicians fear it will affect the outcome of the country’s referendum on the EU treaty in June.

The Irish government has been consistently using a small list of core arguments to persuade citizens to vote in favour of the treaty on 12 June – among them is that EU tax issues can only be decided by unanimity, a fact that will not change with the introduction of the next treaty.

The country’s economic boom in the 1990s was partly due to its low corporate tax rate (12.5%), which attracted high levels of foreign investment into the country.

Monday’s statement by French finance minister Christine Lagarde that “this is one issue that we are determined to push” has seen the Irish establishment both in Brussels and Dublin go into damage limitation mode to try and limit the perception that this would be the first step to a common corporate tax rate.

Catherine Day, the highest official in the European Commission and also an Irish national, said that it is “premature” to speculate on whether the commission will propose a common method for harmonising the basis of setting company tax rates.

“I don’t need to remind you that tax issues are decided by unanimity, so if there ever were to be a proposal, every member state would have to support it. I think after enlargement, there are quite a number of new member states inclined towards the Irish position, saying that different tax rates are a good thing in terms of the business environment,” she told a meeting in Brussels on Tuesday, reports the Irish Times.

“Untimely and inappropriate”
Irish Prime Minister Bertie Ahern reminded parliament that the “unanimous approval” of all member states is needed in this area, adding that he sees “no prospect” for a harmonised corporate tax base and that the Lisbon treaty “does not change that.”

Ruairi Quinn, chair of the Irish Alliance for Europe, called the French proposal “wishful thinking” and a “farcical fantasy” while Europe minister Dick Roche said the comments were “untimely, unhelpful and inappropriate.”

But it is no secret that the issue is being considered in Brussels. Laslo Kovacs, EU tax commissioner, on Monday said “there is a real need for the member states to act together in certain tax policy areas” to increase competitiveness.

Ireland’s rapid response reflects the pressure it is feeling as the only member state to have a referendum on the treaty. A no by Irish voters in June would very likely stop the ratification process across the bloc.

In addition, in contrast to campaigns on past treaties where Ireland also had a referendum, the government is having to face anti-treaty groups on economic grounds.

Libertas, a new group that is arguing that the treaty will lead to Ireland being worse off with the Lisbon treaty, also reacted to Ms Lagarde’s statement.

“A common corporate tax base would destroy the Irish economy. In a challenging economic environment, the stakes could not be higher,” said Libertas chair Declan Ganley.

“Why would we vote for a treaty that weakens Ireland’s voice at the table at a time when there is a huge army of special interests lining up to try and deprive us of the one economic tool that we still have?” he argued.

By Honor Mahony
This article first appeared on EU Observer