Mr. Matt Carthy:

I thank the committee for the invitation and for its engagement with MEPs today and on previous occasions. We are often critical of the fact there is not enough engagement between the representatives of the Dáil and those of us who represent the country in Europe. When I first went to the European Parliament in 2014 and joined the Committee on Economic and Monetary Affairs as a substitute member, I had very clear priorities. At the time we advocated strongly for retrospective recapitalisation of the Irish banks to alleviate the burden that had been placed upon us, to stand up for Irish citizens and to oppose an austerity agenda that was very much championed at an EU level and imposed on the Irish State and other countries by the troika and to support regulation of the financial sector to make it more stable and fairer for consumers. These priorities still stand although in some cases, the position of the Government has made it very difficult to see how we can achieve them, particularly with regard to retrospective capitalisation. It seems the Government has surrendered in that battle.

On the debt and deficit rules, I welcome that the Government has belatedly begun to call for flexibility after enshrining those rules in the Constitution. Since I have been in the European Parliament and over the past number of years, we have had new priorities, primarily as a result of Brexit. It is a notion none us ever thought we would see. I am in a position where it now makes up around 40% or 50% of my work, which is the case across the Sinn Féin team of MEPs. Our priorities now include the protection of Ireland, particularly with regard to the all-Ireland economy, the peace process and the Good Friday Agreement and the EU budget in the post-Brexit scenario considering that one of our larger contributors will exit the European Union. Other issues have arisen as a result of what is now a strong international focus on tax avoidance, tax evasion, money-laundering and other financial crimes as a result of some of the leaks we have seen. I sat as a member of the Panama Papers inquiry committee that was established by the European Parliament and which completed its work last December. I am now a member of the new Special Committee on Financial Crimes, Tax Evasion and Tax Avoidance, which is looking into all of these issues. We are also working on ensuring that Irish mortgage holders are protected, insofar as possible, from the sell-off of their homes to vulture funds. We are also involved with colleagues across the EU to try to resist what is a new way of financial deregulation.

With regard to taxation, people will be aware of my party's position on tax sovereignty. It is one of our principal issues. I have consistently argued at an EU level that the Irish State and other EU member states should retain maximum economic powers in order to safeguard the democratic decision-making process but also to be able to respond effectively to the specific challenges that happen in very diverse economies in the EU. That includes the power to set and collect our own taxes, whether corporate or otherwise. Having said that, and having sat on the committees I mentioned, I am now convinced the only way we can tackle cross-border tax avoidance - it is almost all cross-border - is through binding and enforceable international rules. My preference is that those global tax rules would be set at the United Nations. I support the OECD BEPS process as an important step forward internationally but I recognise its limitations in terms of both its ambition and implementation. There is a role for specific EU-wide action to combat base erosion and profit shifting across borders within the Single Market. It does not mean we support every EU tax proposal - far from it. We examine every proposal on its merits and make judgments on it with regard to the potential impact it would have on the Irish economy, its impact on tackling tax avoidance and its impact on sovereignty issues.

On the digital taxation proposals, I am following these two files as closely as possible. I will engage constructively with them. It is far more focused and targeted than the more sweeping proposals that were outlined in the CCTB and CCCTB proposals and which I and Sinn Féin have opposed for several reasons. It is important that members all recognise where these proposals are coming from. There are four reasons for the Commission's proposals. One reason, as Mr. Hayes has already said, is that digital firms are effectively paying a corporate tax rate of less than 10%, which is half of the effective tax rate for bricks and mortar. The prevalence of tax avoidance schemes and tax breaks on intellectual property in many EU member states means that in some cases the effective rate is far lower than 10% and sometimes as low as 0% to 1%. There is a crucial problem with the OECD on this issue because members of the OECD disagree on how to implement action 1 of BEPS, whether to create a digital tax and if so what form it would take. The interim report from the OECD on this issue released last month demonstrates the level of the disagreement, particularly the very strong opposition from the Trump Administration. It means it is unlikely we will see OECD action in the near future. We know there are a number of EU member states that are already trying to tackle this issue unilaterally. The 3% levy on turnover proposal is the aspect most reported on but the general approach of defining a taxable digital permanent establishment is an important proposal, which warrants close consideration. While global approaches are absolutely preferable, we also need to be wary of the approach that states there can be no action outside of the OECD framework at all. In the short to medium term, that means there will be no action at all.

Regarding the potential impact on the Irish economy, it is something we need to examine closely. It is important to recognise the actions of successive Irish Government have contributed to the situation where the Commission is proposing its own legislative initiatives on taxing technology giants.

Last month, the Commission released a report on aggressive tax planning indicators in the framework of the European semester. The report revealed that a staggering 23% of Irish GDP from 2010 to 2015 was made up of royalty payments. The capital allowance regime for intangible assets, which was put in place in 2015, prompted a surge in corporations using intellectual property-related tax avoidance schemes in Ireland and other states. Although an allowance cap of 80% was reintroduced in budget 2018, this huge and unjustified tax break for intellectual property is still allowing digital giants to avoid paying their fair share.

We have been engaging recently with the ECB on its guidance to banks on non-performing loans, which was circulated last month. Along with my colleague, Deputy Pearse Doherty, who is a member of this committee, I am dealing with this matter with the aim of understanding whether the Irish banks' mass sale of mortgages to vulture funds was required under the ECB guidance, as the banks were telling us at that stage. The very firm and clear answer we received was "absolutely not". The chair of the Single Supervisory Mechanism has written to me in response to a letter to state definitively that the ECB has no preference regarding the resolution of non-performing loans. Now that the EU and the Irish regulators have rejected the claim that the Irish banks are required to sell these loans to vulture funds, and have confirmed definitively that debt restructuring and write-downs are alternative options, we need to put in place actions to prevent the continued sale of these loans.

The ECB has also clarified that split mortgages can be classified as performing loans as long as particular legal structures are put in place. Last month, the Commission made a specific legislative proposal based on four key aspects - provisions by banks, securitisation of non-performing loans, debt recovery and a non-binding blueprint for member states to establish an asset management company. Basically, we are going to share our experiences of NAMA with the rest of Europe, God help them. While I have clear issues with some aspects of the proposal, I welcome the decision not to include consumers in the debt recovery proposal and I am pleased that the establishment of asset management companies will be voluntary. The Commission's efforts to revive the securitisation market for non-performing loans is troubling from my point of view. We will engage actively with these proposals as they come before the European Parliament Committee on Economic and Monetary Affairs. I would be interested to hear the views of members in this regard.

Mr. Hayes has outlined the context in which the multi-annual financial framework will take place. My colleague, Liadh Ní Riada, MEP, sits on the European Parliament Committee on Budgets, which has estimated that the Brexit gap could be between €12 billion and €14 billion, which is quite significant. EU Commissioners have been floating various notions and ideas, including the possibility of a 50:50 split between spending cuts in programmes and increases in contributions by member states. I am not fully comfortable with either of these prospects. As we know, EU funds are of clear importance in areas across Ireland. In addition to CAP, initiatives such as PEACE are very important for large parts of my constituency. We need to bear in mind that the Irish State is now a net contributor to the EU budget. As time moves on, we are going to be paying increased contributions anyway. Of course, this committee and other committees here in the Oireachtas will have to consider that for every additional €1 we pay to the EU, our Minister for Finance will have €1 less to distribute as part of his annual budget. Given that the CAP budget is going to come under threat - it would have come under challenge regardless of Brexit - the potential exists for Ireland to agree to increase its gross national income contributions without seeing a corresponding increase in the CAP budget, or even the maintenance of that budget at its current level. We need to be very vigilant in that regard.

I am aware that I have spoken for longer than the Chairman would have liked. I will conclude by referring briefly to Brexit and financial services. As I have said, my priority with regard to Brexit is not to campaign for, support or defend financial services firms in the City of London but to ensure our own interests and our own communities are protected. I am thinking particularly of Border communities and communities in the North. My view on financial services in a post-Brexit scenario largely coincides - for once - with the current position of the Commission, which is that the market actors themselves should be responsible for responding and adapting to the new circumstances while maintaining our own financial services and our own economy, in so far as that is possible. I apologise for taking a little too much time.