Thorny issue of taxing tech set to test Franco-Irish diplomacy

Pat Leahy: Coalition is facing a choice between two unappealing alternatives

Of course Emmanuel Macron was laying it on a bit thick when he visited Dublin on Thursday. Ireland, he wrote in the visitors' book at Áras an Uachtaráin, "occupies a special place in the heart of the European dream". Michael D and Micheál Martin responded with gusto throughout the day. "The links between us are deep and they have never been stronger," Martin told him at Government Buildings. President Higgins was uncharacteristically understated, referring to "the deep and warm friendship between France and Ireland", in a dinner speech which ranged across the subjects of history, philosophy, statecraft, climate and geo-politics.

The dinner was Macron’s second visit to the Áras in the course of the day, having spent the morning discussing the future of Europe with the President and some invited intellectuals, over coffee, scones and – photographs revealed – Jammy Dodgers. Well, it would give you an appetite, I suppose.

The patient accrual of goodwill is a worthwhile endeavour

I’m teasing, but having friends matters for a country, especially a small country. The friendship between Ireland and France is close and productive for many Irish people; but it is also important in itself. The diplomatic and political fluffery might seem a bit over the top, especially when you witness it up close, but it has real value. Diplomacy works. The patient accrual of goodwill is a worthwhile endeavour. For a small country with limited resources whose people are found all over the world, it is especially valuable. Ask the people airlifted out of Kabul with French help in recent days.

But Franco-Irish diplomacy faces some pretty stiff challenges in the coming months because the two countries are at odds over one of the defining international questions of the age: taxing the tech giants. The issue raised its head on Thursday. Even amid all the fine words of friendship and fraternité, there was no mistaking the froideur on this point. As one senior French figure told Lara Marlowe, “there is a grain of sand in the mechanism and the grain of sand is Ireland”.


From the French point of view, this is fair enough. President Macron told the Taoiseach that on Brexit, “We will never let you down”. But what about Ireland letting France down?

There is no mistaking Ireland's isolation on this point. For a country that has dedicated so much time and effort to making friends around the world, this is a deeply uncomfortable position to be in. Even a man as inclined to bonhomie as Paschal Donohoe looks glum when the subject is mentioned. Balancing his role as the guardian of Ireland's tax sovereignty with his position as head of the EU's finance ministers will strain Donohoe's patience, and his political skills, in the coming months.

Sometimes it falls on politicians to make far-reaching and irreversible decisions which will affect their country for decades. This is what faces Donohoe now and he has the look of a man who feels the weight of that responsibility.

Of course, it’s not yet clear where the great game on taxing the techies will land, though it is likely that the coming months will be decisive. Ireland’s unstated (at least publicly) position is that it is not unwilling to move, but it wants certainty on what it is being asked to sign up to – is it 15 per cent, or “at least” 15 per cent? Will the EU – under the French presidency for the first half of next year, by the way – take the minimum rate and seek to increase it? And, crucially, will the US Congress agree to Joe Biden’s plans?

Macron's opponents may include Michel Barnier, Ireland's old friend who has declared his intention to run

Talk to senior Irish figures involved and it is very clear that in this process, France is their opponent. And yet, paradoxically, Ireland also has an interest in the success of Macron’s centrist and heavily Euro-centric political project. He faces a re-election battle next year and the success of efforts to tax the tech giants will be an important part of the election debate. His opponents may include Michel Barnier, Ireland’s old friend who declared his intention to run as Macron was hobnobbing around Dublin; they will definitely include Marine Le Pen, leader of the rebranded far-right National Front, runner-up in 2017. Latest polls show her nudging close to Macron in the mid-20s.

It’s true that the French system – where the top two candidates in the first round go into a second round run-off – means that centre right or centre left voters whose candidate doesn’t make it to the final round have tended to hold their noses and vote against the far right. But that is an assumption on which it would be unwise to rely permanently. We have seen just how volatile electorates are becoming; and Le Pen, remember, won more than a third of the vote on the second round in 2017. Polls say her party is the most popular among 25- to 34-year-olds.

What, asks one person who lives in France and interacts with its political system regularly, happens if there is an influx of refugees during the campaign? Macron clearly sees this danger and presses for an EU response to the Afghan refugee crisis. On Thursday, he again stressed the need for a shared EU-wide solution. That will involve not just sharing the load, but minimising the numbers coming to Europe by paying Afghanistan’s neighbouring countries to accommodate them. We may not like the resistance in many EU countries to accepting more refugees, but we can’t deny the political reality of it.

The prospect of a Le Pen presidency is not, for now, a strong one. But it is hardly impossible. And if Le Pen makes it to the Elysée, that is the end of the EU as we know it. As Donohoe and his Cabinet colleagues consider the options that face them on corporation tax, they will have cause to reflect on the basic truth of governing: usually your choice is not between good and bad, but rather between two unappealing alternatives.