European Commission plan on tax was a ‘red line’ for Ireland

European Commission plans that could have removed Ireland’s veto on setting tax rates were described as “highly sensitive” and “a red-line issue” for the country in Department of Finance documents.

European Commission plan on tax was a ‘red line’ for Ireland

European Commission plans that could have removed Ireland’s veto on setting tax rates were described as “highly sensitive” and “a red-line issue” for the country in Department of Finance documents.

An internal briefing explained how Ireland would not support any effort to change Ireland’s tax sovereignty, but suggested the plans were unlikely to be supported by enough EU countries. In January, the European Commission published a proposal, suggesting that “qualified majority voting” be introduced for EU tax policy.

That would impact the ability of countries to set their own corporation tax rates, with a particular focus on taxation of digital giants like Facebook and Google.

The internal brief, prepared for Finance Minister Paschal Donohoe and for officials, said any such move would be “highly sensitive”.

“This is a highly sensitive suggestion for many members states, including Ireland,” it said, “as any move to change the voting method used … would reduce member states’ sovereignty.”

The brief said progress was being made on tax reform, with an “unprecedented” 21 initiatives agreed by all member states since 2015. It said: “Ireland does not see the need for, or merits of, any proposals to move away from the requirement for unanimity.” One section, flagging “Ireland’s position”, described how the country had consistently opposed any change on voting rules, since they were first “flagged”, in 2017, by European Commission president, Jean-Claude Juncker.

It explained how tax sovereignty was an “important issue for Irish citizens” and had been a key part of the debate over the Lisbon Treaty.

The briefing said: “Ireland values, and expects, tax sovereignty as the vital means by which to manage our economic growth and stability. Tax sovereignty provides the Government of the day with the most effective tools for managing their individual economies.” In explaining why Ireland would not support any proposals to change tax-voting rules, it said this was a “red-line issue” for Irish citizens.

The document also described how the EU Commission believed changes to rules on how multinationals and large companies pay tax were only achieved “due to public pressure” and had little to do with “an actual desire” for change from member states.

It said the Commission also believed that countries in the EU — including Ireland — were using tax policy to play “off against each other”.

The briefing warned that qualified majority voting on tax could mean changes would be possible with the support of only a small number of countries.

It said: “For example, it is possible for five of the 28 member states to create a majority on the basis of population (Germany, France, UK, Italy, and Spain). Should the UK leave the EU, it will still be possible for as few as five member states to achieve a qualified majority.” The briefing warned that this type of voting “represents a threat” to Ireland’s ability to set its own tax. It said that “Ireland’s voice would be diminished” in negotiating future tax deals.

However, the report also said that the proposals were unlikely to find support, and that it would not just be Ireland opposing them. The briefing explained: “Many member states are expected to have serious concerns about the Commission’s proposals in this area.”

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