Wednesday 19 June 2019

'Price of support on Brexit will be our tax regime'

Taoiseach Leo Varadkar and European Commission President Jean-Claude Juncker at Leinster House earlier this year. Picture: Damien Eagers
Taoiseach Leo Varadkar and European Commission President Jean-Claude Juncker at Leinster House earlier this year. Picture: Damien Eagers

Laura Larkin and Philip Ryan

The Government is facing the threat of European countries demanding concessions on our tax regime in exchange for support in the Brexit Border battle.

A renowned global news agency says some member states may press Ireland to drop its opposition to wide-ranging corporation tax reform in return for such backing.

Bloomberg quotes an unnamed European official saying “solidarity doesn’t come for free”.

The move is viewed as the first sign that some EU members expect a price in return for commitments to Ireland in the Brexit process.

However, last week European Commission president Jean-Claude Juncker launched another assault on our powers to veto tax matters at EU level.

The suggestion Ireland will be held to ransom was rejected by Taoiseach Leo Varadkar. “I can absolutely guarantee that EU solidarity behind Ireland, the 27 member states supporting us as a country that is staying in the European Union, is absolutely solid,” he said.

European leaders will meet today in Salzburg and will discuss the joint political declaration of the EU's future relationship with Britain.

The low rate of corporation tax in Ireland remains an open sore in our relations with the European Union.

The 12.5pc corporation tax rate is key to attracting foreign direct investment.

Analysis: We learned in the bailout that 'solidarity' comes at a high price

The Bloomberg report says the focus will be on a proposed tax on tech companies.

The news agency report says "some members may press Ireland to drop its opposition to wide-ranging corporate tax reform in return for the bloc's backing on Brexit".

"While no direct link has yet been made between Ireland's opposition to a proposed digital tax on tech giants, pressure may be brought to bear in exchange for support to avoid a hard Border on the island.

Ireland is one of several states to voice concern, amid fears over our ability to attract foreign direct investment.

EU leaders have frequently pressed Ireland over tax reforms. In June, as Mr Juncker reassured TDs of the EU's determination to avoid the return of a hard border in Ireland after Brexit, he also urged them to drop opposition to the digital tax.

"Given the EU's unwavering support around Brexit, it will be politically unsustainable for Ireland to be the sole blocker of tax changes, the person said. Any tax proposal will need the unanimous approval of all EU members before becoming law, meaning a single country could block it," Bloomberg reports.

Opening the Government's Data Summit last night, Mr Varadkar doubled down on Ireland's corporate tax regime, telling the audience: "No matter what happens with Brexit, Ireland will continue to offer a stable and competitive corporation tax regime, strong incentives for research and development, an agile, capable and cosmopolitan work-force, access to the single European market of 500 million people and membership of the Eurozone."

Meanwhile, Finance Minister Paschal Donohoe's spokesperson said the negotiations on Brexit and tax reforms are "two separate issues".

Fine Gael MEP Brian Hayes went a step further and branded the suggestion as "laughable".

"No serious person has said this from the Brexit taskforce or the commission," Mr Hayes said. "Clearly, people close to the Commissioner Pierre Moscovici are using the Brexit negotiation to reheat an old idea from old Europe.

"The unity of the EU and specifically Michel Barnier on the Irish backstop is not in doubt and is not connect to tax reform," he added.

An EU Commission spokesperson said it "strongly rejects" Mr Hayes's suggestion. "The Commission is working constructively and continuously for a deal with the United Kingdom," he said.

He also noted that Mr Juncker last week said all members states "will always show loyalty and solidarity with Ireland when it comes to the Irish Border".

As negotiations come down to the wire ahead of an October leaders' summit, Tanáiste Simon Coveney was in Brussels for a debriefing from Mr Barnier.

The chief negotiator said progress on the backstop was "absolutely essential".

Mr Coveney said EU solidarity must not be underestimated, adding it was getting stronger as the weeks go by. He called for an intensification on the UK's part in negotiations, particularly on the backstop, so EU leaders could make decisions in October.

"We want to see substantial progress and decisions being made at the leaders' summit so that we can actually try to stick to the timelines that have been set now for months, as opposed to allowing things to drift into November and potentially December," he said.

Irish Independent

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