Monday 24 October 2016

EU Commission has over-reached itself

Published 03/09/2016 | 02:30

Finance Minister Michael Noonan Photo: Tom Burke
Finance Minister Michael Noonan Photo: Tom Burke

There's no definitive etiquette to follow in starting a war. Some throw down a gauntlet, while others go straight for the blunderbus, a favoured weapon of choice in Brussels this week.

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Margrethe Vestager's attack on Ireland's tax policy will in time be recognised as a clumsy and inept incursion into our internal affairs.

The covert intent was clearly to take out our corporate tax policy. Having no right to trespass on tax, the Commission targeted the infrastructure of our tax infrastructure, deeming it to be illegal.

And after a week of stuttering disarray, the Government finally spoke with one voice, enabling the Taoiseach to formally declare that we will be appealing the ruling.

Finance Minister Michael Noonan followed on, saying some member states were trying to "establish a bridgehead" to bring down our 12.5pc corporation tax.

The Commission has made a mistake. Even Chancellor Merkel has looked askance at the over-reach. She expressed concern that it could damage foreign investment across Europe.

Swatting a small fry like Ireland with some shock tactics by Commission storm troopers is one thing; opening up an all-out transatlantic trade fire-fight with the EU is quite another. This is a very dangerous game, just as the union has been rocked to its foundations by Brexit.

In 'The Art of War', Sun Tzu advises: "Supreme excellence consists of breaking the enemy's resistance without fighting." Margrethe Vestager may not be fully familiar with the ancient Oriental classic; if she was, she might have tried more subtle means.

The application of knuckle-dusters to knock a peripheral member into line will have done serious damage to perceptions about how Brussels views the union's smaller states.

Asked if he regarded the Commission's move as an attack on our tax regime, Mr Noonan was commendably forthright: "There is a lot of envy across Europe about how successful we are in putting the HQ of so many companies into Ireland and especially into Dublin."

The mandarins in Frankfurt and Brussels may well scoff at Ireland's "persecution complex", but there is no denying that this has been a defining week for EU relationships.

Ours is arguably the most open economy in the zone. It was the transfusion of foreign direct investment that got the flat-lining heart of the economy pumping again.

In the depths of the crash, when we needed assistance from Brussels on debt relief and when we also sought some easing of the burden by burning bondholders, Brussels was implacable.

Frankfurt feared that the euro could fall through the floor, the plight of the currency was the priority. Thus the Irish taxpayer endured the biggest transfer of private debt on to the backs of a sovereign nation in recent economic history. The toll of this is seen even in the figures published today, where middle-income earners are paying vastly more tax than they did before austerity measures kicked in.

A typical earner on €55,000 is paying over €2,000 more in income taxes than in 2008. For all these reasons, the irresponsible dangling of a €13bn illusory carrot before the people was a dazzling but dangerous stunt. The cost of grabbing it could be the future of 150,000 hi-tech jobs should overseas investors take flight.

Besides, Ms Vestager invited other EU countries to have a bite of it, should they see fit. The clumsy handling by the Commission also exposed the parlous state of the Coalition bringing it to the brink.

Issac Newton, famous for another apple landing on his head, said: "Tact is the knack of making a point without making an enemy." The Commission might take note.

Irish Independent

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