Willie O'Dea (Limerick City, Fianna Fail)

I second the motion. It is regrettable that we feel it necessary to have this debate to reiterate our opposition to any change in our corporate tax regime. I was recently involved, along with colleagues from all sides, in trying to persuade the people of the country to support the Lisbon treaty and I did that on the basis that our income tax and corporate tax regimes were inviolable; they were matters for Ireland alone and nothing could ever happen to change that. President Sarkozy himself came to Dublin during the recent Lisbon treaty referendum and gave the same assurance in unambiguous terms.

It is also regrettable because everyone is aware, and none more so than Chancellor Merkel and President Sarkozy, that this country is in an economic crisis of the first magnitude. They are aware that the country is disproportionately dependent on foreign direct investment. Foreign direct investment has been the generator of a great deal of Ireland's wealth. They also know that the foreign direct investment that has flowed into the country, particularly from the United States, is inextricably linked to our single, simple rate of corporation tax. The regime, which has been in place for 14 years, has become a brand; it is administratively simple and it is certain.

I regret that moves in Europe enjoy support from some in this country. An article by a journalist in a leading national newspaper asked, "Are the multinationals really that economically shallow that if we bumped up the rate from 12.5% to 15% or so, that they would up sticks and leave? What companies like that really want is certainty". I quote that as a typical example of someone who is incapable of even taking his own side in an argument. Simplicity is the attraction of the Irish corporation tax regime. If the rate was increased, or even decreased, that certainty would be removed and that is the attraction of the scheme.

The effective rate of tax in France is 8.2%, the effective rate in Luxemburg is 4.1% and in other countries, the effective rate is almost 0%. In Ireland, the effective rate is 11.9% but in those other countries, the rate depends on allowances that can be claimed and on the activity engaged in. Anyone applying for the allowances must plough through legalese and employ lawyers and tax accountants while the central attraction of the Irish system is its simplicity. Furthermore, recent studies by the Organisation for Economic Cooperation and Development have shown a 1% increase in corporation tax in this country would lead to a 3.7% decline in foreign direct investment. We are into the law of diminishing returns.

If an attempt to raise the rate of corporation tax from 12.5% is the direct assault on Ireland, CCCTB is the Trojan horse. Time does not permit me to go into the technicalities but it means any company that locates its headquarters here with a view to selling overseas, instead of being able to attribute its profits to Ireland, and pay tax to the Irish Exchequer at 12.5%, will see its income allocated to the other countries in which it trades. The rules for allocation will be drawn up by the EU and if there is a problem with interpretation, they will be interpreted by the EU court. It does not require the wisdom of Solomon or a degree in economics from Harvard to conclude that this will fundamentally and fatally undermine the attractiveness of Ireland's corporation tax regime. There would be no point in fighting for a 12.5% rate; the rate would be irrelevant because there will be no profits to apply the rate to.

In its submissions on behalf of CCCTB, the European bureaucracy has advanced two arguments. The bureaucrats tell us it will bring simplicity and reduce compliance costs and that it will involve a lower rate of tax. No one seriously believes that at a time when the corporation tax take in Europe is dropping, the European bureaucracy really intends this convoluted system to result in an actual reduction in tax rates. Ernst and Young has studied the matter by applying CCCTB to business in the real world and it reached the conclusion that:

CCCTB would, in the opinion of the businesses surveyed, lead to an increase in compliance costs. In addition to the average increase of 13% in compliance costs, businesses would also incur substantial once-off costs in the transition to a new system.

Ernst and Young's report also indicates:

The majority of businesses found that their corporate income tax burden would actually increase under a CCCTB. This was largely because the apportionment mechanism meant that a greater proportion of income would be apportioned to, and taxed in, Member States with higher corporate tax rates. Only one business ... was found to have a lower corporate tax burden under a CCCTB, and this occurred as a result of benefiting from the current year cross-border loss relief.

That it the position and it could not be simpler.

There is a major level of foreign direct investment, FDI, in the mid-west reason. On foot of my long career as a politician, I am aware that, in practice, multinationals establish headquarters in Ireland and then proceed to sell their products to other, richer European countries. Under what is proposed, the profits on which these companies pay tax to the Exchequer will be allocated to those countries to which I refer and the tax will be then paid in those jurisdictions. In other words, the tax will move directly out of our coffers and into those of these richer states. As a result, the balance between rich and poor will be redressed in reverse.

Peripheral and poorer states are more than entitled to argue that the best way to redress the balance between them and other states is through the proper use of their competitive tax advantage. After all, is that not what the EU is all about? Is that not what was intended in the case of the Cohesion Fund and Structural Funds? Studies have found that countries such as Poland, the Czech Republic and Slovakia would lose most revenue under a CCCTB. They also found that Ireland would lose most of all.

I am slightly confused. The Taoiseach made an unambiguous statement with regard to a CCCTB representing tax harmonisation via the back door. However, I heard other members of the Government make different statements. I do not want the Taoiseach to return from the forthcoming summit and state that, as a result of some miserly concession he obtained from the Franco-German axis, we are going to engage constructively with the concept of a CCCTB. How can one engage constructively with something that will deliver a potentially lethal blow to the heart of the economy? When he returns from the summit, I want the Taoiseach to state that he has spurned any attempt to draw Ireland into supporting a common consolidated corporate tax regime. To paraphrase the words of a well-known music hall performer, France and Germany's attempts at conversation in this matter should remain unanswered.

We persuaded the Irish people to vote in favour of a number of referenda on foot of assurances to the effect that our tax system would remain within our control. The people kept their side of the bargain and it is now time for others to do likewise.

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