Warning over harmonising EU tax rates

ANY EUROPEAN moves towards harmonising tax rates across the EU would prevent Ireland from properly managing its own economic conditions, the Department of Finance has warned.

Addressing the Dáil European Affairs committee yesterday Department of Finance assistant secretary Brigid McManus said Ireland was strongly opposed to any moves at European level which would diminish our tax independence.

“The right of member states to decide upon taxation issues allows them to take account of their own position in the economic and business cycle.

“Losing this right could severely impair the ability of each member state to manage the economic conditions particular to it,” she said.

Ms McManus was responding to recent concerns arising from the Convention for the Future of Europe where moves to introduce qualified majority voting on the issue of tax have been strongly resisted by Ireland and a hand full of other member states including Spain and Sweden.

Currently under the EU Treaty the majority of directives and regulations governing direct and indirect tax require the agreement of all member states before the law can be changed.

Ireland has the lowest European level of taxes and social security contributions at 31.2% of gross domestic product. The European average is 41% while Sweden clocks in at 54%.

However Ms McManus cautioned that the policy of tax decision making by unanimity at European level was still the subject of debate and would be discussed at the next Intergovernmental Conference.

A report by Commissioner Mario Monti, which called for greater tax harmonisation in order to support the single market and EU employment policy, still reflected EU policy, she said.

“We view this approach by the Commission as going far beyond the idea of ‘co-ordination of EU policy’ in the direct tax area, as being a disproportionate approach to dealing with obstacles and as interfering with member states autonomy and sovereignty in tax matters,” Ms McManus said.

“The right to chose the level of public spending and how this will be funded is a basic function of the democratic process. It touches directly on the relationship of the citizen to the state. We want to preserve that invaluable asset by retaining its use at national level,” Ms McManus said.