THE GOVERNMENT last night pledged to “resolutely oppose” any EU tax harmonisation measures as it expressed “scepticism” about plans for pan-European rules on the taxation of business profits.
The initiative from the European Commission ran into a wave of opposition from business interests but the EU authorities insisted that the proposed common consolidated corporate tax base (CCCTB) could help the Irish economy.
Taxation commissioner Algirdas Semeta will brief Minister for Finance Brian Lenihan on the plan at a meeting in Dublin on Monday week.
Although the policy would not harmonise tax rates, the Government greeted news of Mr Semeta’s proposal with strong words on the protection of its 12.5 per cent rate.
Fearful that a CCCTB would dim the lustre of its tax rate, the Government has argued in the past on grounds that such a policy would undermine tax competition in Europe.
Minister for Enterprise Batt O’Keeffe said the 12.5 per cent tax was extremely important for foreign direct investment and would not be changed.
A Department of Finance spokeswoman said the Government programme guarantees the rate “and clearly states that we will resolutely oppose any attempt to introduce tax harmonisation within the EU either directly or through technical measures”.
The Government viewed the CCCTB concept with a “scepticism” that was shared by many of its EU counterparts, she said.
Like all EU members, the Government has a veto over taxation proposals. However, powerful states such as France favour the CCCTB.
Mr Semeta is very unlikely to achieve unanimity, but will invoke an “enhanced co-operation” procedure under which a group of countries can introduce common EU rules that apply only to them. If backed by a significant number of member states, this could put non-participants at a disadvantage.
Such a procedure was deployed for the first time in June when some countries recognised each other’s divorce law, a move Ireland avoided.
Sources in Brussels expect the Government to align against the CCCTB proposal with like-minded allies such as Britain and several former eastern bloc countries.
Mr Semeta’s spokeswoman said, however, that a CCCTB “could really make a difference to the ease with which companies trade within Europe” and would also make the EU more attractive to investors. “This could make Ireland a more attractive market for foreign investors who want to trade within Europe,” she added.
However, the response in Dublin was overwhelmingly negative. Fine Gael finance spokesman Michael Noonan said he opposed any change in the tax rate and his Labour counterpart Joan Burton said it was “absolutely critical” that the current rate was retained.
Business lobby Ibec also criticised the proposal, its director Danny McCoy said he would work with his counterparts in Europe to ensure the plan was opposed.
Irish Taxation Institute president Andrew Cullen said the proposal would have a detrimental effect on Ireland’s competitiveness.
