Richard Bruton (Dublin North Central, Fine Gael) | Oireachtas source

The Deputy’s first question about the force of the recommendations is a good one. Most are recommendations which are jointly adopted before our peers. The CSRs for Ireland will be adopted by the entire Union of 28 states. We are making a political commitment to deliver to one another. There are enforceable clauses in any recommendations that relate to finance because of the obligations under the various fiscal treaties, such as borrowing levels. These include the excessive deficit and imbalance procedures. They could eventually lead to sanctions. The idea is that we seek as a Union to develop reform agendas that are in our mutual interest. We commit mutually to try to improve in those areas, which is mostly a political commitment. There are, however, situations in which there is more power, in the so-called macroeconomic imbalance area. That is the formal position.

Private and public indebtedness issues are not new. Ireland’s public debt peaked last year at 120% of GDP, or whatever the figure was. That is high. We have a long-term commitment to get down to 60% over time and there are various expectations in the fiscal treaties of how we should move in the short term. For example, moving to a 3% borrowing target is the major commitment. The focus on private indebtedness is on the bank work-out of mortgages and small businesses in distress and looking for a way to deal with those problems. We have high private indebtedness as well as high public indebtedness.

That is one of the challenges of this recession compared with other recessions. It is not only a cyclical dip, as people have said; it is also a balance sheet recession. In other words, many households and big companies are impaired with debts. Therefore, it is not only a cyclical dip from which it is easy to recover. Clearly, that is a challenge. The experience not only in Europe but generally is that the quicker one can manage to come to terms with those debt issues, the quicker recovery comes. That is where the level of European concern in this area comes from.

The wider issue of tax policy and pressure to change it is at the heart of the so-called BEPS - base erosion and profit shifting - process where the OECD is examining how some companies have been able to play off features of different tax codes and arrive at a situation where they pay negligible levels of tax. Ireland's position is very clear, that there is nothing wrong with our tax code, but we are fully engaged in a process with the OECD and with other colleagues to come up with what would be multilateral changes to make sure the interaction of these codes does not work in a way that allows companies to avoid paying tax anywhere. We are fully engaged in that process. We can gain as much as lose from engaging in that process. We are not a tax haven. We have a low certain tax code with very clear statute-based provisions. The countries that will come under pressure in this are people who have a roll your own type tax code where they give different tax arrangements to different companies that come along. If we can maintain our straightforward, statute-based, low corporate tax rate, that can be a competitive advantage. Clearly, we have to work to ensure that but we are very engaged. The Minister, Deputy Noonan, and the Department of Finance were very much at the heart of EU work in this area, even before the BEPS process started at the OECD level.