Mr. Kevin Cardiff:

I presume in terms of his first question, the Deputy is talking about the potential exit of Britain from Europe. People keeping saying that but in fact Britain cannot exit Europe but can only exit the EU and therefore the relationship between Britain and the EU will be essential to all of us. The question is so broad as to be almost unanswerable.

The implications of a Brexit are so broad as to be very difficult to answer, certainly in the short term. The audit implications are clear enough. We will have to work out how we audit any EU funds that remain in the UK after Brexit and will have to work out how to audit the financial impacts of a Brexit. There will be payments in different directions, a net payment or whatever. There has to be a calculation of amounts. We could potentially be involved in any of those things. We could also give opinions on the legislation. All those matters are in the future and it is not possible to plan an audit without a sense of what the transaction will look like.

Regarding a bonanza on taxes, there are three or four things happening. Most taxes are member state competences in principle and in practice. Corporation taxes are principally a member state competence, but there are co-ordination mechanisms, including what is called a code of conduct group at EU level. There is co-ordination at super-EU level, for example, the OECD base erosion and profit shifting, BEPS, initiative. That is not to say it is suggesting the base should be eroded and the profits shifted, but it is asking how to address the fact that those things happen.

We do not look at national level tax systems because they are outside our remit. To an extent we can look at national level VAT systems because the VAT system is not a purely national issue. We have done audits on the VAT system in the past and we have found flaws in the system that needed to be corrected. We need to remember that some EU income is based on VAT receipts, so that is also important.

The final item in the mix is the EU state aid rules. We are all aware of the Apple case. I have no more knowledge about that case than anybody else who reads the newspapers. In that case the Commission is not saying we have breached a particular directive or that this was EU money that was misused; it is saying there was a breach of European state aid rules. The easy answer is to tell the committee that it is a matter for the European Court of Justice rather than for the European Court of Auditors. However, there is a potential audit angle in the future.

In the past we have looked at the area of the Commission that deals with state aids. We have looked at its organisation and some of its activities especially around the financial crisis in 2007 and so forth, and came to some conclusions about its organisation. I cannot imagine that we, as an audit body, would reopen a particular legal case that the European Court of Justice is looking at. However, the part of the Commission that deals with state aids is within the audit remit, so we would occasionally look at its organisation and its product.