Saturday 1 October 2016

You pay to play in the EU - and this mess is nobody's fault but our own

Published 21/07/2016 | 02:30

'Between farm supports and structural funds, we traditionally drew down far more from the EU than we ever paid in' Photo: Bloomberg
'Between farm supports and structural funds, we traditionally drew down far more from the EU than we ever paid in' Photo: Bloomberg

You pay to play in the EU, and in broad strokes the price is worked out on a fairly straightforward basis.

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Rather than a flat fee per country, or a price based on population, it's the size of the economy that matters.

In our case, having long been poorer than the European average, the exact formula didn't really matter for almost the entire time we've been members.

Between farm supports and structural funds, we traditionally drew down far more from the EU than we ever paid in.

Those days are well behind us now. News this week that the Irish bill will go up by close to the €300m a year mark confirms it.

That bill has gone up on the back of last week's controversial new figures from the Central Statistics Office. It showed gross domestic product (GDP), the standard EU measure for the size of the economy, had gone up a whopping 26pc in 2015.

The rise has been roundly ridiculed, but the numbers are correct. By including the value of companies claiming an Irish headquarters - many of which only arrived from the US in the last 24 months - as well as the massive number of aeroplanes owned by Irish leasing firms, the CSO came up with a figure of €244bn for the 'size' of the Irish economy, up from the previous €193bn.

With the size of the economy up, our higher EU membership fee is basically automatic.

In Britain, which has always had to pay to be in the EU, the annual price of admission has been a political hot potato dating back to the Margaret Thatcher era. The yearly row over the bill has been a cause and an effect of Britain's highly transactional approach to the whole thing.

For us, in a country used to getting a free membership ride in Europe, it's all coming as a bit of a shock.

It shouldn't, though. As we've become wealthier this was always going to become an issue. The freakish growth figures only bring it home more dramatically.

If Ireland's apparent economic might is exaggerated by a handful of recent corporate transactions, there's not much point in whining about it. It's certainly not anyone else's fault.

As a country, we've actively marketed ourselves, both overtly and with a wink and a nod, as an unusually attractive place to be in business - including the lowest corporation tax rate in the developed world.

We wanted businesses to come here, and they've come. By and large, that's been to the benefit of all of us, creating hundreds of thousands of highly skilled, well paid and generally secure jobs over five decades.

In the last year alone, corporation tax has poured into state coffers at a far higher rate than ever before.

Some 'Irish' companies, it's true, barely have a foot on the ground here, including some of the biggest pharmaceuticals businesses anywhere.

Thanks to an accounting quirk they all count towards our GDP.

That hits us in the pocket, which only means our largely successful economic policies come with an element of downside. But what doesn't?

The EU rules on this one are clear. We pay to play based on the size, and shape, of the economy we've created. If we don't like that, we need to look first and foremost at our own company law and tax rules.

The likelihood is, we'll ultimately see this bill as a price worth paying.

On the flip side, paying our way in Europe, arguably even overpaying to be in the club, means we need to be more outspoken than ever in defence of our interests, including using this big bill to definitively knock on the head Brussels' relentless push to hem in our legitimate freedom to tax at rates that suit us, and not necessarily our neighbours.

Irish Independent

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