State does not want EU tax harmonisation, says Dukes

The State enjoys the benefits of business paying low headline rates of tax and does not want tax harmonisation across the EU, in all except indirect taxes on such items as alcohol, cars and and cigarettes.

That is the view of the former minister for finance Mr Alan Dukes, who told the National Forum on Europe yesterday that there was nothing inherently contradictory in such an attitude.

While it was not currently "fashionable" to instance the United States when talking about the EU, "economic integration can work extremely well even in the presence of substantial tax differences" between states, he said.

Mr Dukes said it was clearly more important to look at effective tax rates rather than headline tax rates and pointed out that there was nothing preventing other countries from competing with the State's tax rates. "If they had a mandate, any other member-state could compete the socks off us if they decided to do that", he said.

He also said it has proved extremely difficult to get any agreement on any issue of taxation in the EU other than on the VAT tariff in relation to members' contributions. Mr Dukes said it was worth noting that Ireland had some of the highest rates of indirect tax, "and I am not just talking about cigarettes and alcohol".

He was supported by the Minister of State for European affairs, Mr Dick Roche, who said the issue of tax harmonisation "has raised its head again" in the debates of the Convention on the Future of Europe in Brussels.

Mr Roche said that "all who were interested in the Irish economy at this stage would be pushing the issue that there is no compelling case for tax harmonisation, particularly in relation to the corporation tax area."

Mr Roche said the focus was on headline tax rates, in which Ireland had low rates for corporate tax, "which was an entirely wrong focus anyway if you want to have a debate on taxation. As Alan Dukes said, you would have to have a look at a whole range of issues," adding that other countries gave tax breaks which significantly reduced the "real rate" of tax paid by some industries.

A range of speakers mentioned the danger of divorcing deliberations on the social future of the community from the economic measures.

Ms Deirdre De Burca said she questioned the exclusion of social policy issues from the deliberations of the Working Group on economic governance within the Convention of the Future of Europe.