Mr. Pierre Moscovici:

First, about VAT, why do we favour broadening the VAT base in Ireland? There are many more supplies at reduced and zero rates of VAT in Ireland than in most EU member states. That means these reduced rate supplies are being subsidised by the taxpayer. Ireland has recognised that for income tax purposes. Tax expenditures in the nature of credits and exemptions must be regularly evaluated to assess effectiveness. We consider that the same principle should apply to VAT.

In many cases there are more effective and efficient ways to address the economic and social issues that reduced rates are supposed to address. In general, base broadening for VAT would be appropriate in many member states. The Commission has called for an efficient, neutral VAT system based on a broader tax base and taxation at the standard rate. We understand that, politically, there could be resistance to this approach but a process of systematic evaluation by Government of reduced rate supplies would, for the reasons I mentioned, highlight the costs and benefits of addressing this issue.

On health care reforms, and more specifically on the patent medicines, the evidence from recent years indicates that Ireland faces a challenge in delivering health care cost effectively. Budget overruns occurred systematically over recent years and pressures continue to build up. Public expenditure on health care is comparatively high compared with other EU countries, even though population health outcomes are, by and large, no better. Some efficiency gains have been achieved in recent years but the challenges remain significant. This is why some structural reforms appear necessary to provide quality health care at an affordable price to society.

Without seeking to be exhaustive, the recommendations are, therefore, in the case areas where cost-effectiveness can be improved and, in our view, this includes public spending on patent medicines whose prices are well above the EU average. The Commission has highlighted this problem in its recommendations but it is for Ireland to assess how to address these challenges.

I would insist on that point. CSRs are not a lecture or a lesson. I am not a teacher, the Commission is not a professor and member states are not pupils. People in government and in parliaments are certainly not pupils. What we do is deliver our own analysis and make suggestions to the Governments because we think they are right in order to create a debate and to develop national ownership. It is then up to the member states, through their own democratic processes and institutions, with their own sovereignty, to address these issues or not. We forget or minimise some issues, we consider there is the beginning of a solution on some issues, and we insist a lot on other issues. However, I think that, globally, what we say is right. We point to some problems which exist in the average society, be it German, French, Italian, Slovenian or Croatian society, and it is then up to them to decide. The next year, given the progress of the European Semester, we evaluate the result and what has been done.