Liam Twomey (Wexford, Fine Gael)
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The matter for discussion is an overview of the country specific recommendations in the European context. I would like to welcome the Commissioner for Economic and Financial Affairs, Taxation and Customs, Mr. Pierre Moscovici, to Ireland and to our meeting. Mr. Moscovici was taking part in a seminar this morning at the Institute of International and European Affairs on Ireland's recovery. It is certainly good news to be able to use that term after a number of years of painful and real sacrifice made by the Irish people in order to deal with the crisis. As our debt and unemployment falls and GDP and exports rise, Ireland has shown its commitment to tackling its own problems and in doing so has also helped the rest of the European Union. The committee will be glad to hear Mr. Moscovici's views on how he sees Ireland's progress within the European context and on the recently published country-specific recommendations.

The format of the meeting is that Mr. Moscovici will make some opening remarks and a question and answer session will follow. I remind members, witnesses and those in the Visitors Gallery that all mobile phones must be switched off.

I draw the attention of witness to the following. By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable.

I invite the Commissioner to make his opening remarks.

Mr. Pierre Moscovici:

I thank the Chairman and honourable Deputies and Senators, it is a great pleasure for me to be here in Dublin and an honour for me to address the committee this afternoon. My pleasure is made all the greater by the atmosphere of hope and renewal that I sense in Ireland today after years of deep crisis and difficult, but necessary, reforms.

Let me begin with a few words on the broader European economic situation. As I said when presenting our spring economic forecast earlier this month, the European economy is now enjoying its brightest spring in several years. The upturn is being supported by both external factors and policy measures that are beginning to bear fruit. Growth in the EU is set to rise from 1.4% in 2014 to 1.8% this year and to accelerate further to 2.1% in 2016. Deficits are continuing to decline steadily and the debt to GDP ratio is forecast to begin falling, as of this year, for the first time in the last seven years. Unemployment, while still high, is now falling steadily and is set to continue doing so next year.

The outlook is more encouraging than it has been for a long time. At the same time it is clear that more needs to be done to ensure this recovery is durable and sustainable, delivering on investment and reforms and sticking to responsible fiscal policies is, in our view, key to obtaining the lasting jobs and growth Europe needs.

Ireland can be justly proud of the recovery the country is experiencing. The signs of Ireland’s turnaround are there for all to see. Ireland was the EU’s fastest growing economy in 2014 and is forecast to maintain that position in 2015 and 2016. Irish sovereign bond yields have declined markedly, with the yield on a ten year bond standing at approximately 1.2% in mid-May, with a spread over German bonds of 66 basis points. That is a very astounding result for a country that had lost market access in 2010. That is very impressive. The economy is growing strongly thanks to the recovery in domestic demand and, most importantly, unemployment has fallen steadily from almost 15% in 2012. It is expected to drop to 9% in 2016, now it is approximately 10%, well below the euro area average. These are performances of which the Irish people can be proud. Ireland’s strong economic rebound is truly remarkable and goes to show that adjustment and reforms do pay off when they are carefully designed and enjoy clear ownership by the authorities.

That is not to say the journey is over. It is too soon to say mission accomplie, mission accomplished. No one should lapse into complacency. There are legacies of the crisis that have not yet been fully addressed and continue to create challenges and risks for Ireland. These include the high public debt, the difficulties faced by many households and small and medium sized enterprises, SMEs, in paying their debts, which is also a problem for the financial sector in terms of non-performing loans and unemployment and skill issues have also to be addressed.

What does the Commission, which I represent, see as the key priorities for the Irish economy? There are four key priorities as our country specific recommendations, CSRs, which the brisk economic recovery now under way provides an ideal opportunity to address. First, Ireland needs to complete the job of addressing the legacy of the crisis. The crisis has had a devastating effect on public finances with debt reaching an unprecedented 123% of GDP in 2013. It also brought to light less obvious vulnerabilities, as Ireland moved towards the peak of the bubble in the last decade cyclically sensitive revenues were used to grow permanent Government expenditure at a rapid pace, further fuelling an overheating economy. Over the past few years Ireland has made major progress in strengthening its public finances and fiscal framework. It has delivered deficits below the ceiling set by the excessive deficit procedure for the past three years and is on track to achieve a timely correction of the excessive deficit in 2015 and thus to enter into the preventive arm of the stability and growth pact in 2016. Ireland has also introduced important innovations for the budgetary process with the Fiscal Responsibility Act 2012 and, most importantly, it has implemented fiscal rules that emulate those at EU level and Ireland like other countries, such as France, has introduced an independent fiscal council.

In spite of all this progress, public debt, which is still high and is forecast to be 107% of GDP in 2015, is a vulnerability that will require years of prudent management of the public finances to address. For this reason, the Commission, which takes the same line as the International Monetary Fund and OECD on this issue, continues to encourage Ireland to seize opportunities to accelerate deficit and debt reduction. While Ireland has also made progress in widening the tax base and making it less vulnerable to cyclical developments, more can be done on this important front.

Second, everything possible must be done to avoid the boom-bust cycles of the past. It is not inevitable that past experience of boom and bust should continue to characterise Ireland's economic cycle. Three key measures will help minimise the risks of boom and boost. The first of these is firm implementation of medium-term budgetary planning, including by limiting discretionary powers to change expenditure ceilings. The second is predicating budget laws and medium-term budgetary projections on prudent growth forecasts and progress towards the medium-term budgetary objective of balancing the budget in structural terms by 2018 and remaining in structural balance thereafter. Apart from fiscal policy, the critical factors behind the most recent episode of boom and bust in Ireland were, as members well know, the housing market, bank lending practices, regulatory failures as well as an insufficient governance and supervisory framework at the euro area level. Progress has been made in this respect, for example, in the establishment of the single supervisory mechanism, which should reduce the risks of boom-bust cycles.

The third priority must be to support sustainable growth and job creation. The economy has regained the competitiveness it lost during the past decade. Its rebalancing between the tradeable and non-tradeable sectors is also nearing completion, supported by the overall flexibility and adaptability of the economy. The Action Plan for Jobs and Pathways to Work strategies have contributed to Ireland’s recovery. However, the unemployment rate, especially youth and long-term unemployment, remains high. For this reason, there is a need for investment. Capacity constraints in some areas indicate a particularly urgent need for investment in the water sector, public transport, social housing and broadband. The health care sector is still in need of reform as well as investment because there is no contradiction between reforming and investing. The Commission has also highlighted, among its country-specific recommendations, the insufficient supply of affordable child care, which is an impediment to the participation of women in the labour market and increases the poverty risk of children.

The fourth priority is to address medium and long-term economic challenges. Demographic developments, in particular, the ageing of the population, will generate a number of pressure points that call for immediate action to avoid more difficult decisions down the road.

The number of senior citizens will grow very significantly over the next decades, which will raise the cost of health care, long-term care and pensions. While a number of reforms have been put in place already, we believe that additional steps are needed to ensure that the provision of public services is adequate and affordable.

In the area of health care, critical choices on the level of public provision of services will be made in the context of the move towards universal health insurance. We believe that at present Ireland spends a larger share of its GNP on health care than the EU average without however achieving better health indicators for its population and that is why we insist on some reforms in the area of pensions, education and training programmes.

Before I conclude these introductory remarks, let me say a few words about the Commission’s plans in the area of taxation. I am Commissioner for Economic and Financial Affairs, Taxation and Customs. I am aware that corporate taxation is one of the most sensitive areas of Ireland’s relations with the European Union, but I also believe that our goals in the area of taxation are ultimately the same. We agree on the need for fair taxation, which is essential for sustainable economic development and democratic legitimacy, especially in difficult economic times. We also agree that taxation must support growth and competitiveness, but by delivering stability, legal certainty and administrative ease that investors and businesses demand.

The Commission appreciates the steps that Ireland has already taken to steer its corporate system in this direction, such as the decisions to limit the double Irish and prevent stateless companies for tax purposes. However, in a Single Market the goals of fair and efficient taxation cannot be met through purely national action. The economies of our member states are too connected for that. That is why a common approach is essential to create a fairer, more efficient, growth-friendly corporate tax framework for the EU and that is at the heart of the Commission’s agenda for corporate taxation in the EU.

We are delivering fast. In March, I presented an ambitious tax transparency package, including a proposal for the automatic exchange of information on tax rulings and next month I will present an action plan, which will be discussed by the Commission tomorrow, for a fundamental review of the EU corporation tax framework. It will present EU solutions to the main corporate tax challenges that our member states face today with a view to deliver fairer taxation, more stable revenues and a better environment for businesses.

The action plan, as I said, is still being finalised so I cannot give too many details today, but I am sure members are already aware that it will include a new approach to the common consolidated corporate tax base, CCCTB, proposal. It is no secret to me that CCCTB is not Ireland’s favourite proposal but I would urge members to keep an open mind. We have listened carefully to expectations and concerns of member states on CCCTB and on corporate taxation in general and I assure members that our new approach will reflect that.

I firmly believe that CCCTB, with some adjustment that we are ready to make, can be a highly effective tool against tax avoidance while also improving the Single Market considerably for businesses to trade and invest across borders. It can also cement a coherent EU approach in applying the new international standard of which members are aware is called the banking electronic payment system, BEPS, led by the OECD, in a way that protects and reinforces our Single Market.

That is in all of our interests and so I will speed up on those points.

To conclude, let me say a few words on the country-specific recommendations that the Commission put forward a few days ago on 13 May. A big effort was made this year to streamline the European semester process. The number of recommendations was reduced for Ireland, as it was for all other member states. Last year, there were seven recommendations entering into strong detail, while this year, there are four recommendations addressed to Ireland and they focus on public finances and taxation, cost effectiveness in the delivery of health care, addressing the low work density of households and boosting access to affordable child care and, finally, completing financial market sector reforms. Labour market reforms, access to finance and the reduction of legal services costs are no longer subject to recommendation this year. This is because we decided to focus on a more limited number of key priorities. This does not mean that reforms in those areas are no longer important, as that is not the case and I wish to be clear about that. By design, these country-specific recommendations are of a relatively short-term nature. Their implementation nevertheless would help Ireland to address the challenges I highlighted today and to ensure that Ireland's economic spring stretches for many more seasons to come. Again, however, I insist, it is logical that my task regarding what has been done must not make the joint committee forget my main message today, which is there is a window of hope and renewal, that there are impressive achievements and that we simply wish to help the Irish people, the Irish Government and the Irish Parliament to consolidate. I thank members for their attention.

Liam Twomey (Wexford, Fine Gael)
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I thank the Commissioner for his time. As time is short because we are a little limited in this session, may I limit contributions to five minutes? We will have five-minute contributions and if we have time, we can go back over it again. Does Deputy Michael McGrath-----

Michael McGrath (Cork South Central, Fianna Fail)
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In deference to my colleagues who were present from the outset, I can wait a while.

Liam Twomey (Wexford, Fine Gael)
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If the Deputy does not mind.

Michael McGrath (Cork South Central, Fianna Fail)
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I do not.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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What is the time limit?

Liam Twomey (Wexford, Fine Gael)
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I think we will finish at 3.15 p.m. Does Deputy McNamara, who indicated his desire to speak, wish to start?

Michael McNamara (Clare, Labour)
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Yes, and I thank the Chair. I have just four questions. I thank Mr. Moscovici for his attendance and for going through the country-specific recommendations with regard to Ireland. Does the Commissioner think it is unusual that it has taken so long to implement reform to the legal services in Ireland, given this is a matter that has been flagged for so long? Does he have thoughts on the delay? Second, in the bailout memoranda, it was recommended that Ireland introduce further deterrents to corporate crime and in particular to increase the penalties for summary prosecutions, but this has not happened. Does he have views on that? Is corporate crime something the Commission encourages or discourages or on which it has any views at all?

As for the financial transaction tax, the Commissioner discussed taxation and obviously, Ireland has opted out of the financial transaction tax. Is that a matter on which the Commission has taken or takes a view? What impact would it have on Ireland's recovery were it to opt in to the introduction of a financial transaction tax? Finally, on the issue of the privatisation of State resources, legacy resources are very much in the news today in Ireland. In the Commissioner's native country and more so in the United Kingdom and Spain, golden shares were used to protect assets after they were privatised, the British Airport Authority being one example and Telefónica being another. The Commission, which Mr. Moscovici represents here today, successfully took cases against them and, consequently, they essentially were obliged to get rid of their golden share. Does the Commissioner have views on the suitability of golden shares to protect legacy assets?

Liam Twomey (Wexford, Fine Gael)
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I thank Deputy McNamara. I invite the Commissioner to respond.

Mr. Pierre Moscovici:

On legal services reform, the Commission continues to view this as a major reform that must be completed as quickly as possible.

We were encouraged - that is why it is not so serious an issue for this year - to see that some progress has been achieved recently in the context of the legislative process and that the authorities remain committed to having the Legal Services Regulation Bill enacted as soon as possible. The Commission has indicated on numerous occasions that progress towards enactment has been unduly slow, which is unusual. It therefore continues to encourage the authorities to complete this important reform, which has implications for all citizens and for Ireland's competitiveness. The Commission will continue to monitor progress in this area as part of the European semester. Even if there is no longer any specific country-specific recommendation, this matter has been allowed to drag on for a long period and it must not be allowed to go on much longer. This is why we insist on that.

On corporate crime, I have no specific comment to make.

The financial transaction tax, FTT, was proposed by the Commission a few years ago but it did not attract unanimity. By the end of 2012, 11 countries decided to come together to achieve enhanced co-operation. They are working actively on that, with the support of the Commission, which is favourable to such a tax. There is now a reasonable chance that an agreement can be reached in the weeks or months to come. Those involved with the enhanced co-operation project are trying to work on a more limited number of scenarios. In that context, there are now three main scenarios under consideration. The global idea is that there would be a broad base and a low rate. That should be the principle now, in my opinion, and those involved are working on different versions of it. I hope it will enter into force because, as well as the Commission, I am personally in favour of it. What will be the impact on the Irish economy? The important point in that regard is whether a country opts into or opts out of the FTT and what kind of economic and financial flux this will generate. The process relating to the kind of co-operation to which I refer must be inclusive. Some countries might decide to join while others might not. Of course, how they proceed relates to their own financial sectors and how they perceive them. The main effect of the process will be felt by the countries that opt in rather than those that opt out.

As far as golden shares are concerned, it is an anti-trust issue. This matter clearly does not come under my portfolio. While I can sometimes express views on issues of this nature, I fully respect the position of my colleague Margrethe Vestager, under whose portfolio this matter falls. When she comes before the committee, perhaps she will answer the Deputy's question, or perhaps not.

Michael McNamara (Clare, Labour)
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Given that I did not use all of the five minutes allocated to me, may I ask a supplementary question?

Liam Twomey (Wexford, Fine Gael)
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The Deputy actually used the entire five minutes available to him.

Michael McNamara (Clare, Labour)
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Did I? I thought I was more succinct than that.

Liam Twomey (Wexford, Fine Gael)
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I will come back to the Deputy later.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Given the short amount of time available, I will try to fire my questions out as quickly as possible. On the larger European picture, why is the Brussels group - the newly named troika - of which the European Commission is a member, bullying Greece to the point that it might be driven out of the European Union? Although nobody really knows what might be the outcome of the latter, it could possibly trigger the beginning of the end of the euro project. Why has Greece been placed in an unprecedented situation whereby it is being obliged to take the cash reserves of local councils and other state bodies in order to pay interest on debt? The Commissioner can correct me if I am wrong, but I believe this to be an absolutely unique and unprecedented demand on a country. As understand it - and, again, I stand open to correction - this is being done in order to shove more austerity, in the form of pension cuts and so-called labour market reforms, down the throats of the Greek people, who have already endured so much and who are in the midst of a devastating humanitarian crisis.

Could the Commissioner explain the stance he is taking, which I consider bizarre and cruel?

That leads to my next question on the issue of debt. The Commissioner referred to the problems of public debt in this country and he is, more generally, concerned with high debt levels across Europe. We are finding out through the banking inquiry at least one story of the previous Government being told by the ECB to "save the banks at all costs". A gun was put to its head. Mr. Moscovici says he is concerned about debt, yet the policy seems to be to force people to take on these massive debt burdens at a devastating cost. Could he explain that contradiction?

Liam Twomey (Wexford, Fine Gael)
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The Deputy should leave time for a reply.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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He said there was no contradiction between reforming and investing, but there is a big contradiction in those policies. The Commission has demanded cuts in public expenditure in areas such as health and social welfare, but then it gives out about the fact that we do not have decent child care services and says we should have investment, which is a direct contradiction. Is there not a contradiction in Mr. Moscovici's comments in saying that is not the case?

Liam Twomey (Wexford, Fine Gael)
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There are two minutes left in the Deputy's time. He will not get all these questions answered.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Mr. Moscovici is concerned about macroeconomic imbalances. Joseph Stiglitz recently said that the real macroeconomic imbalance, which the Union does not seem to understand, is the gross inequality in the distribution of wealth, a point which Thomas Piketty has also made. This is the pattern across Europe, and it is the danger to macroeconomic stability. Why is that not addressed by him?

Could he also comment on what many people consider to be the return of a property bubble, with rent and property prices going through the roof in this country? What does he think of that?

Some of us oppose the consensus on making Irish corporate tax sacrosanct. We think the rate is ridiculously low and that we should break away from a tax piracy corporate tax policy. What is his view on the replacement of the "double Irish" measure with the patent box or the so-called knowledge box? My view is that it is the same thing by another name and it is another tax avoidance facilitation. Will he comment on that?

Liam Twomey (Wexford, Fine Gael)
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I will have to ask the Commissioner to stop at some point unless he answers "Yes" or "No," because the Deputy is running out of time.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I took no longer than Deputy McGrath.

Mr. Pierre Moscovici:

Is it five minutes for questions and answers?

Liam Twomey (Wexford, Fine Gael)
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I will allow some latitude. Mr. Moscovici should not worry.

Mr. Pierre Moscovici:

I will take a little time. The Brussels group is not the new name of the troika. The troika was not only the functioning of the three institutions which are still on board - the ECB, the IMF and the Commission - but also a way of proceeding, with people going to Greece and telling the politicians what they had to do and what prior actions had to be taken. It was useful at one stage; it is no longer the way we function. We have the Brussels group, which is those three institutions together with the ESM and the Greek Government, and we are trying to find a deal and an agreement. I see that the Greek Government itself wants reforms, and the question is how far and how fast this can go. We do not want to impose more austerity on Greece. Debts have to be repaid and reforms have to be made if one wants to have a more competitive economy that is capable of creating more jobs. We are looking for an agreement and I wish for agreement. I want Greece to stay in the eurozone. It is not the beginning of the end. On the contrary, this agreement will be the beginning of a more solid Greece inside the eurozone. We have little time to reach that. We are making progress and we are discussing it constructively, but that is the way we are now moving.

The ECB certainly did not tell the Irish Government to save banks at any cost.

As the committee will know, I have been a politician for quite a long time. I was an MP in my country for 20 years, and I remember the financial crisis, yet one has to see that the level of public debt is too high. If one is in favour, as the Deputy said with regard to reform versus investment, of more investment in some public services, then one must be aware that each euro that is dedicated to reimbursing public debt is a euro that is not useful for the economy or public services. It is one euro less to finance education, health care, child care or whatever. So, on the contrary, one can see it is a pre-condition in order to have more investment and better public services. That is why there is no contradiction.

I shall return to discussing banks. The Commission has contributed to the banking inquiry, and Mr. Marco Buti, the Director-General for Economic and Financial Affairs, ECFIN, is willing to contribute further. He did it once before and is willing do so a second time, if necessary. I believe that the choices made in those difficult years were necessary, but they must be seen in that specific context. Those choices do not prove that public debt is a friend of an economy, but the contrary.

Macro imbalances must be addressed at a global level in the EU. My personal conviction is that the question of inequalities must be addressed in the future. We discussed structural reforms in the previous period, which predated this crisis. We are now in a period of recovery and this question cannot be ignored. Certainly, we need to take this matter into account in the future.

Corporate taxation is a major project for us. We will deliver an action plan in the weeks to come.

Liam Twomey (Wexford, Fine Gael)
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I thank the Commissioner.

Aideen Hayden (Labour)
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My first question is on country-specific recommendations in their totality. I read a statistic, although I cannot remember where, that 85% of all country-specific recommendations have not been acted upon. I am sure the statistic is incorrect, even though I cannot provide the correct one. However, the existence of such a statistic has led me to question whether the process has merit and wonder to what extent country-specific recommendations are a wish list. In Ireland's case, most of the recommendations are the same as last year.

My next question is on the banking sector. Mr. Moscovici mentioned four issues, which included the banking sector and our failure to deal with legacy debt. The CSRs were issued before the Government made its most recent announcement of further changes to the mortgage arrears scenario, particularly the removal of the bank veto. In other words, individual banks no longer have the ability to effectively refuse an arrangement going forward. Does the Commissioner have a view on the Government's most recent changes to the process? Has it changed his opinion of the specific recommendation?

My third question echoes some of the concerns expressed by my colleague, Deputy Boyd Barrett. I refer to the fact that we are continuing to remove money from an economy that needs investment. I was surprised that this year's CSRs did not mention the specific deficit in the construction sector. I refer to the construction and housing sector and the specific difficulties we have, particularly in urban areas, with regard to access to housing. I was surprised that the matter did not feature in the CSRs this year.

Like many people, I believe that a potential British exit from the EU is one of the most significant threats facing the Irish economy. The Commissioner mentioned some of the growth figures expected for Europe over the next number of years. Some people have pointed out that because 40% of Ireland's trade is with the United Kingdom and its economy has grown significantly, Britain has therefore saved Ireland and contributed to Ireland's impressive growth rates.

In terms of a British exit, Mr. David Cameron has indicated that competitiveness is one of the major challenges leading his particular desire for reform. Europe's share of the world output is projected to fall by about one third in the next two decades. Can the Commissioner comment on the impact on Ireland of a potential British exit and on what Mr. David Cameron has said in respect of Europe's failures to tackle competitiveness?

Mr. Pierre Moscovici:

First on CSRs, they are qualitative and not quantitative so it is very hard to give a credible percentage for implementation but obviously it needs to improve. That is what we are trying to do this year. Last year there were seven recommendations for Ireland but this year there are four. They are more strategic recommendations. We are not trying to enter into too much detail but we are pointing to some issues that are relevant and strategic. We include those CSRs in a global strategy through investment, structural reform and through pursuing sound and prudent fiscal policies. What we want to do through that is to help national ownership and thereby increase the level of implementation. I am here to debate with government, civil society and the Parliament and to show that our common goal is to improve the state of the Irish economy in terms of creating growth and jobs. As far as mortgages are concerned, we are assessing a new mortgage initiative, a report on which will be available in July. In terms of housing and construction the Commission recognises that supply constraints in the property market are an important issue in Ireland, as was pointed out by some members of the panel at the meeting I attended this morning. However, the Government is introducing policies especially targeted at supporting the construction sector and the supply of housing. It is still a concern but it is not among the recommendations because action is being taken.

As far as the Brexit is concerned, there was a recent election in Great Britain, the result of which we are all aware. After the elections, Mr. David Cameron announced that a referendum would take place before or in 2017 to determine whether Britain would remain in the European Union. I am aware of the strong links between the Irish economy and the British economy. All economic studies suggest that it would be a major problem if not more than that for the European Union and the British economy itself if Great Britain exits from the European Union. Clearly, the Commission wants Great Britain to stay in the EU. We believe that the place of Great Britain is in the EU but at the same time, we are also aware that in the treaties, there are some fundamental freedoms. We will see what the precise demands of Mr. Cameron are. Discussions are starting and last night President Juncker met Mr. Cameron. I did not speak to him on the telephone this morning to hear about the exchange they had, but I will hear about that tomorrow. It is the start of the process but this process must lead to Great Britain staying in the European Union. There can be some changes but there is also the logic of European integration, which has to be fully respected. As far as competition is concerned, globally speaking, we have a major problem in our economies which is the lack of investment, the investment gap. The figures show that the EU invested 15% less than in 2007.

If we cannot find a solution and fill that gap, ten years from now we will be second division players in the world economy. That is why the Commission is truly addressing this question through the investment plan, which I understand was presented in Ireland by Vice President Katainen last week. We want to speed up on investment. That is the best answer we can give with respect to the lack of competitiveness in our countries.

Liam Twomey (Wexford, Fine Gael)
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I thank the Commissioner for those comments. I call Deputy Michael McGrath.

Michael McGrath (Cork South Central, Fianna Fail)
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I welcome Commissioner Moscovici. Following on from what Senator Hayden said, I would make a brief comment. If anybody was asked to give an overall macro view of the top three or four outstanding issues in Ireland at present, the accommodation crisis, especially in major urban centres, would be at the top of the list. The European Commission should examine that issue and put pressure on the Government to deliver on that. The Commissioner might think it odd I would say that given that Ireland built so many houses during the boom years but the reality is that in the areas where people want to live, where there is demand for houses and where employment opportunities and educational institutions exist, there is a chronic shortage of available accommodation. That issue should be firmly on the Commissioner's radar.

I wish to raise a few issues with the Commissioner, one of which is the European Commission's formal investigation into Ireland's corporation tax arrangements with Apple. As he knows, a formal state aid investigation has been under way, in some respects, for almost two years at this stage. There was a preliminary probe in autumn 2013 and a formal investigation has been under way since the summer of last year. When does the Commissioner expect that investigation will conclude? In many respects, it is a cloud hanging over Ireland's corporation tax regime. The Minister for Finance is on record as saying that he believes the probe will be dropped and that it will not go anywhere, but it is important for the country and for our inward investment offering that the investigation would be concluded swiftly one way or the other.

On point No. 4 of the CSRs, relating to the banks, mortgages and SME indebtedness, the Commissioner made the comment that he would like to see the Central Bank strengthen the monitoring arrangements in terms of the roll-out of sustainable solutions. I do not know what he means by that. Will he clarify what he means by that? Is the Commission satisfied with the quality and sustainability of the solutions being put in place? The Commissioner should be made aware that there is much less focus on the SME loan book, which is also in serious distress, than there is on residential mortgages. That is an issue that should be on his radar.

The Commissioner referred to the central credit register, which was recommended four or five years ago in the troika programme. That still has not been delivered, and the Commission's recommendation that it be in place by the end of 2016 is not terribly ambitious.

Mr. Pierre Moscovici:

I will not make any further comment on the housing issue as I answered a question on that issue when replying to Senator Hayden.

On tax arrangements with Apple, as announced at the start of the new Commission, the fight against tax evasion and tax avoidance is one of the Commission's key priorities, and one of mine. The investigation into the tax ruling practice of member states under state aid rules is just one of the examples of how the Commission wants to tackle this problem. To be clear, we have no problem with tax rulings as such. I have been a finance Minister for two years and I know how important it is for a company, which for example would like to invest in France, to have the possibility being capable of anticipating the taxes it will pay in a country. There are no problems as long as it does not provide a selective advantage to specific undertakings. However, as the Deputy knows, in the case of Apple, the Commission has started an in-depth investigation because it suspects that such an advantage has been granted.

While it is too early to speculate about the concrete outcome, my colleague, the Commissioner for Competition, Ms Vestager, set the highest priority on closing the four cases. Those decisions have to meet the highest quality requirement and therefore the Commissioner does not favour, at this stage, a fixed deadline. It is clearly in her portfolio and I would repeat that she has to answer that when the time comes. Then we will take our own responsibility. As the member knows, I have myself presented a proposal for a directive on automatic exchange on tax rulings with the philosophy I just gave a minute ago.

On sustainable solutions for non-performing loans, NPLs, we are aware of issues. Our position has been outlined several times and on various occasions. NPLs remain very high and it is a clear sign that solutions are not forthcoming. Authorities are fully aware of this and our CSR is really insisting a lot on all the points mentioned - all of them.

Michael Creed (Cork North West, Fine Gael)
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I welcome the Commissioner and his colleagues and apologise for being unavoidably late. I am interested in a couple of the country-specific recommendations to which he referred in his script and which were in the published recommendations. One has to do with VAT. The document from the Commission states that the Commission questions the efficiency of reduced and zero-rated consumption taxes - that is value added tax here - and calls for a systematic evaluation of these expenditures. We had a very welcome initiative in the context of the difficult financial circumstances in which we found ourselves, with a reduction in VAT from 13.5% to 9% in the tourism sector and a consequent significant increase in the number of sustainable jobs created. It would appear to me that the Commission is suggesting such initiatives are neither worthy nor sustainable and I wonder if the Commissioner would like to comment further on that.

The Commission document also recommends what would find unanimous agreement here, namely, reduced public expenditure on patented medicines. However, as Ireland is a relatively small country that is successful in attracting a perhaps disproportionate share of foreign direct investment, specifically in the pharmaceutical sector, that sector is very valuable for us. It is difficult for individual nation states to grapple with the power of the large multinational pharmaceutical industries to achieve affordable patented drug prices.

We have cases which regularly hit the headlines here of individual patients' medicines costing perhaps in excess of €500,000 per annum. There is a consequent tension between the right of the individual to access medicines to sustain life on the one hand, and affordability on the other. Is there a role for the Commission at EU level, which would have greater strength to deal with this issue collectively across the 28 member states? Exorbitant prices are being charged to individual public health services for patented medicines.

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.

Liam Twomey (Wexford, Fine Gael)
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I thank the Commissioner. There is mobile phone interference so I ask that all phones be switched off. Taxation policy was always considered to be within the national remit of each individual country because it was seen as part of their way of keeping their economies competitive through being able to vary their taxation systems. This was because, obviously, for peripheral countries like Ireland to have control of their taxation policy would give them some competitive advantage in regard to central European countries which have bigger markets, better infrastructure and, therefore, a competitive advantage over peripheral countries like Ireland.

Ireland's taxation policy is very transparent. Every single company in Ireland, big or small, whether it is a multinational or the local garage or plumber, pays 12.5%. In many European countries, however, from what I can gather at European meetings where members of parliament are present from different countries, and even at OECD meetings, it seems that corporation taxation policies are opaque and can even vary within countries, depending on which region one goes to. When Mr. Moscovici talks about a common consolidated corporation taxation policy, are these issues, including historic issues, taken into account?

There is a certain concern in some of the peripheral countries of the Union that we are seeing a retreat to the centre, with the larger member states consolidating among themselves rather than taking into account what is happening on the peripheries. It is possibly because our system is so transparent that we are so easy to beat up, to put it mildly. Meanwhile, countries whose systems are far more opaque are difficult to analyse precisely because it is so difficult to say how much corporations there are actually paying. When people go to the trouble of working that out, it transpires that many of these countries are charging much less in corporation tax than we are in Ireland.

Another issue I wish to raise might be outside of Mr. Moscovici's remit, but I would appreciate his view on it. When the Commission Vice President, Mr. Katainen, was here last week, some of our discussion was about the need for investment and it was notable that the emphasis in this regard seems to be very much on structures and infrastructure. Mr. Moscovici has made the point that we do not want to end up in the second division because we are not investing. I would argue, however, that the real problem for Europe is that we are not investing in people. The gap between demand and supply in the case of, say, skilled information technology workers is huge. My concern is that we do not seem to be moving in a direction that would see a closing of that gap in the foreseeable future. Will Mr. Moscovici comment on that? Efforts to address the issue must take place at European rather than national level and involve major investments in people and universities to bring skills sets up and enable us to compete into the future in this very important sector.

Mr. Pierre Moscovici:

Thank you, Chairman. First, I agree that taxation issues are mostly to be addressed at national level. It is a matter of subsidiarity and sovereignty. At the same time, the EU does have a taxation policy, which is to fix some common rules and principles and a common framework. That always has been the case and we have, for example, directives on VAT.

What I propose as Commissioner with responsibility for taxation is to act on three main priorities. The first, which is not the most important, relates to the financial transaction tax. The Commission supports the principle of FTT, although we are leaving it up to member states to decide what they will do. It is no longer a Commission initiative. The other main points of my action plan are to do with transparency and competitiveness. In fact, everything I do in the next five years will be based on those two priorities. On the question of transparency, we started with the proposed directives on automatic exchange of information on tax rulings. I have stated that I do not condemn the principle of tax rulings, but any such rulings which introduce capacity to distort competition have to be avoided. I will make more proposals in the future for increased transparency and competitiveness. Then I will move on to the common consolidated corporate tax base, CCCTB.

The question was raised as to whether EU actions could threaten member states with a more competitive tax regime. If a country's competitiveness is based on fair and transparent practices, there is no threat there. However, if a country is intentionally profit-shifting at its neighbours' expense, then it is not a sustainable economic model. As I said in my introduction, we all want the same thing, namely, a fair and transparent taxation policy. It is in the capacity of the EU to develop that. We welcome Ireland's decisions to end tax regimes that might support aggressive tax planning. These have included measures to deal with stateless companies and phase out the double Irish. The Irish authorities are now doing something that is different, fair and more transparent. Any decision on taxation issues must be made under conditions of unanimity. This sets a limit to the European power and gives responsibility to member states.

Coming back to CCCTB, the project has been stuck for years and it is reasonable to ask why we are re-launching it.

Now more than ever, the common consolidated corporate tax base, CCCTB, has real relevance. It could make an important contribution to growth and competitiveness, making cross-border business easier and cheaper in the Single Market. It also offers a potentially powerful tool for reducing tax avoidance and making corporate taxation more transparent. It could be a solid framework through which to implement many OECD base erosion and profit shifting, BEPS, measures in a way that worked for the EU.

In developing the way forward for the CCCTB, we have taken into account member states' concerns and expectations from the discussions to date. What I propose - the Commission will debate it tomorrow - will be somehow new. I will ask for something from this committee, the Irish Government and the Irish Parliament. I am conscious that this is not their favourite proposal, but I ask them not to enter into this debate with a closed mind and to consider what the Commission proposes. There should be good political support for relaunching the CCCTB with some adaptations, given the need for effective tools to combat corporate tax avoidance. It will be a dialogue between us. I will not repropose exactly the same thing. I am trying to think about what the preoccupations of member states, including Ireland, were in the previous debate, as this proposal has been on the Council's table for almost five years.

I hear the accent members place on investing for the people. That is what this is about. We must invest in the future economy, that being, digital, transport, energy, human capital, innovation, research and universities. These are the priorities that will be supported by the Juncker plan. Mr. Jyrki Katainen was here last week and heard messages from the committee, particularly about the adaptation of the Juncker plan to the size of the economy, but I would insist on another point, namely, the capacity of the Irish economy, due to its people's skills and the quality of its universities and human capital, to build qualitative projects that can be supported by the Juncker plan. I am sure that my view is shared by Mr. Katainen and I know that it is the philosophy of the Commission President. The question is not whether a country or project is large or small. It is whether the project is good or bad. I am certain that a country like Ireland, which I know well having visited this Parliament several times more than ten years ago, albeit perhaps in a comparable room to this one, is capable of developing human capital, people's skills and good projects for the investment plan. This investment plan is for Europe, not this or that country or public or private. It is for public and private and all of our countries.

Liam Twomey (Wexford, Fine Gael)
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I thank the Commissioner. We have nearly run out of time and the Commissioner has a deadline.

Mr. Pierre Moscovici:

I am going to meet the Chairman's friend, the Minister for Finance, Deputy Noonan.

Liam Twomey (Wexford, Fine Gael)
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We will give the Commissioner a chance to have a cup of coffee before he does that.

Mr. Pierre Moscovici:

We have a few items to discuss.

Liam Twomey (Wexford, Fine Gael)
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On behalf of the joint committee, I thank Mr. Moscovici for participating in this meeting. We hope to see him again in Ireland soon. Perhaps he will not leave it for so long next time.

Mr. Pierre Moscovici:

I thank the committee for its invitation.

Liam Twomey (Wexford, Fine Gael)
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I propose to suspend briefly before resuming in private session to deal with correspondence and other issues.