You might recall when this Government entered office in March 2011, there was a “Gallic spat” between Enda Kenny and French president, Nicolas Sarkozy, and after “grandstanding” and demanding a reduction in the interest rate on Ireland’s bailout, An Taoiseach left an EU summit meeting with a flea in his ear after he refused to entertain a French request to discuss Ireland’s headline corporate tax rate of 12.5%. At that same summit in March 2011, Greece did get an interest rate reduction of over 1% on its bailout. Five months later, Ireland like Greece and new-bailout country, Portugal did finally get a reduction on the bailout interest rate. Yes, we’d lost a few tens of million of euro in interest from March to July – the interest rate was to apply retrospectively to loan tranches received but only from July 2011, the interest rate that pertained from Jan-Jul 2011 was the old higher rate – but at least we were placed on an equal footing with Greece and Portugal. Portugal however was gifted the interest rate reduction with no strings attached – Ireland had to agree to “participate constructively in the discussions on the Common Consolidated Corporate Tax Base draft directive (CCCTB) and in the structured discussions on tax policy issues in the framework of the Euro+ Pact framework” as a quid pro quo for its interest rate reduction.
After the summit there was legacy concern that Ireland’s cherished corporate tax rate which has helped being a country, which had bypassed the industrial revolution under British dominion which had no interest in developing a potential competitor, into the information age. Yes, Microsoft, Google, Intel and the rest are here because of the educated, English-speaking, young and flexible workforce and okay infrastructure but the 12.5% corporate tax rate swings it. And yet, 14 months ago, we introduced uncertainty on our tax brand as a quid pro quo for getting an interest rate reduction which was gifted to Portugal.
Fast forward to June 2012 and the EU has yet another summit where it issues a communiqué which includes the statement
“The Eurogroup will examine the situation of the Irish financial sector with the view of further improving the sustainability of the well-performing adjustment programme. Similar cases will be treated equally”
So if similar cases are to be treated equally, you would have expected Ireland to seek to void the commitment given in July 2011 to enter into tax discussions. After all, it was a term inserted for a reason and has only created doubt over our corporate tax arrangement which is unhelpful when we are trying to attract long term investment. Unlike the debt deal which is still being thrashed out if your believe certain ministers, voiding the tax commitment would presumably have been a simple matter and could have been done by the mandarins over the summer break? You’d think. But according to Minister Noonan last week, there was no conditionality placed on Ireland in 2011 when the interest rate reduction was accompanied by the statement that Ireland – not Portugal or Greece – would agree to engage constructively in discussions on our tax arrangements.
Last week in the Dail, the Sinn Fein finance spokesperson Pearse Doherty asked Minister for Finance Michael Noonan about what we had done to void the commitment extorted from us last year as a condition of getting the interest rate reduction. “What commitment?” was the Minister’s response. It’s as if there was no basis whatsoever for the “Gallic spat”
Deputy Pearse Doherty: To ask the Minister for Finance further to the EU summit statement on 29 June, 2012 which states similar cases will be treated equally, if he will set out the efforts that he has made to reverse the condition imposed on the State in July 2011, when a cut in interest rates on programme funding was made conditional on the State agreeing to participate constructively in the discussions on the Common Consolidated Corporate Tax Base draft directive, CCCTB and in the structured discussions on tax policy issues in the framework of the Euro+ Pact framework in view of the fact that the cut in interest rates in July 2011 on Portugal’s programme funding was not conditional on any such potential concessions on tax arrangements.
Minister for Finance, Michael Noonan: As a committed member of the European Union Ireland always participates constructively in discussions at EU level as that is the only way to ensure that issues of concern to the State can be considered. Any attempt to reverse our approach now would be counterproductive, especially in view of the critical role to be played by Ireland during our upcoming Presidency.
The Euro Plus Pact comes under the aegis of the Department of the Taoiseach which coordinates the updating of Ireland’s set of objectives under the Pact.
This is an agreement which applies to all of the euro area Member States – as well as Bulgaria, Denmark, Latvia, Lithuania, Poland and Romania – and its focus is primarily on areas that fall under national competence. The Pact refers to a commitment by Member States to engage in structured discussions on tax policy issues, for example, to ensure the exchange of best practices, and fight against fraud and tax evasion while acknowledging that direct taxation remains a national competence. There is no commitment in the Pact on CCCTB. It simply says that: “Developing a common corporate tax base could be a revenue neutral way forward to ensure consistency among national tax systems while respecting national tax strategies, and to contribute to fiscal sustainability and the competitiveness of European businesses.
The Commission has presented a legislative proposal on a common consolidated corporate tax base”.There is no conditionality placed on the commitment made by Ireland in this statement.