We would suffer under EU common tax proposal, says Flanagan

NEW PROVISIONS in the Lisbon Treaty on a common consolidated corporate tax base would disproportionately lead to winners and losers among EU member states, Charles Flanagan (FG) said.

“Most worryingly, Ireland is identified as one of the group which would experience reductions in GDP, employment and foreign direct investment,” he added.

The House passed a motion rejecting the provisions.

Mr Flanagan, who chaired an interim Dáil committee on the issue, said the directive was commonly known as the CCCTB.

Under new provisions set out in the treaty, each national parliament had eight weeks from the publication of a proposed new EU legislation to consider formally if it complied with the principle of subsidiarity.

That deadline concluded today and seven other national parliaments were expected to agree reasoned opinions by then that the directive breached subsidiarity.

In the EU context, said Mr Flanagan, subsidiarity was a concept about the level of governance, whether EU, national, regional or local, at which action should be taken.

It was based on the presumption that action should be taken at the lowest level of governance consistent with the subject matter and the objective to be attained.

Having considered the proposal, the committee’s recommendation was that it breached the subsidiarity principle.

Mr Flanagan said that since 2001, previous Irish governments had consistently made it clear that direct taxation was primarily a matter for member states and that fair tax competition, not tax harmonisation, was the basis on which the EU could compete with the rest of the world.

“In that context, it is not surprising that the draft CCCTB directive has met with opposition in Ireland among the business sector, political parties and policy makers,” he added.

Supporting the committee’s decision, Fianna Fáil’s Michael McGrath said it was important to state that the issue of sovereignty regarding corporation tax was a key issue in the treaty campaign.

Clear commitments and assurances were given that direct taxation would remain in national competence, in line with EU and EC treaties.

While successive governments had been very clear on the issue of Ireland’s corporation tax rate, the CCCTB presented an equally dangerous threat to the State’s economic and industrial policy.

“I agree with what the Taoiseach stated previously, that effectively this proposal represents an attempt at tax harmonisation through the back door,” Mr McGrath added.