Republic’s EU contributions based on ‘distorted figures’

The Republic's annual contributions to the EU budget are based on distorted figures, the Public Accounts Committee has claimed.

In its latest report, the committee said established macroeconomic indicators, which go towards determining member state contributions, had become unreliable in the Irish context.

“The distorted picture they provide overstates debt sustainability, and is costing the State hundreds of millions of euros each year in the EU budget contributions.”

Strong economic growth here and less strong growth elsewhere means the Republic’s contribution has risen rapidly in recent years, from €1.3 billion in 2010 to more than €2 billion last year. It is forecast to be around €2.7 billion this year.

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About 70 per cent of the EU budget is sourced from member state contributions based on gross national income (GNI).

The transfer of multinational assets here in the wake of a global clampdown on tax avoidance has distorted national accounting measures such as GNI, making them unreliable as indicators of economic activity.

The committee recommended that Minister for Finance Paschal Donohoe pursue a legal basis for the adoption of alternative economic indicators in the State's reporting at EU level.

"The Minister should endeavour to make progress on the issue sooner than the two to three year timeframe indicated by the secretary-general of the Department of Finance," it said.

The committee also warned that Ireland’s contributions were likely to increase further due to the shortfall resulting from Brexit.

The European Commission is proposing to raise the contributions it gets from member states for its next seven-year budget, which starts in 2021, in part to make up for the Brexit shortfall.

The Department of Finance expects this to add between €250 million and €400 million on to Ireland’s annual bill, pushing it above €3 billion for the first time.

The UK’s exit is expected to leave a €94 billion hole in the EU’s seven-year budget, while beefed up spending on defence, border controls and the digital economy is expected to push the bloc further into the red without bigger contributions.