Michael Noonan (Limerick City, Fine Gael)

Last November, across the floor of this Chamber during a Private Members' motion on the retention of our 12.5% corporate tax rate there was consensus on all sides of the House. I hope tonight we can send a similar, strong message from this House, a message that the 12.5% rate is a red line issue for us and that we will not entertain any undue pressure to change it.

Last night, some scepticism was expressed about the Government's intention on tax harmonisation in the context of the ongoing debate on the pact for the euro. Let me be clear: the 12.5% rate is not a quid pro quo for any element of the pact for the euro. The message has been given and heard, loud and clear and I assure the House there will be no deviation from that position at the Council meeting tomorrow. What has changed since the Private Members' motion last November is that last week the European Commission published its proposal for a common consolidated corporate tax base, CCCTB. It is expected that the final formula of words in the pact for the euro will acknowledge that publication. In other words, it would simply be stating a fact.

Naturally, it is a fact that it is within the legal competence of the Commission to publish such discussion papers. Contrary to some suggestions last night, the mere mentioning of that fact should not be seen as some fudge or subtlety creeping into the question. The European Commission has the right of initiation in terms of bringing forward legislative proposals for member states to consider and there is nothing to be gained from pretending that this does not happen or from refusing to actively engage on the issue. In fact, the opposite is the case. It would be a gross diminution of our responsibilities not to engage actively and constructively on the issue of the CCCTB. Only in this way can we be absolutely sure that all of the arguments are brought to the table. Ireland has always been prepared to work with the Commission and other member states on tax policy issues and we have no problem in reiterating that fact. However, we will be ensuring that it is clearly understood that such co-operation is clearly on the basis that taxation is a matter for national competence and that the principle of unanimity is fully respected.

Much has been said about the difference between headline rate of tax and the effective tax rate. We have no axe to grind about the effective tax rates available in other countries but we merely wish to point out that the effective rates are more material to the debate on tax competition than headline rates. Several recent reports have suggested that the effective tax rates that apply in some European countries may be considerably lower than previously thought. The World Bank PricewaterhouseCoopers study suggests that 11 EU countries have effective tax rates lower than Ireland, while a KPMG study also highlights the various ways in which other European countries lower the effective tax rate by virtue of tax base narrowing.

There was a suggestion last night that the Treaty on the Functioning of the European Union somehow facilitated the passage of EU tax legislation by qualified majority voting as opposed to unanimity. That suggestion was also put forward during the debate on the Lisbon referendum, despite all the evidence and legal opinion to the contrary. The European Commission's draft CCCTB proposal is precise on this question when it states that "direct tax legislation falls within the ambit of Article 115 of the Treaty on the Functioning of the EU". Should one care to look up Article 115 of the TFEU, it clearly states "acting unanimously". The legal basis of the proposal is not Article 48 of the TFEU, to which I believe the Deputy was referring last night. In any event, Article 48 facilitates a shift from unanimity to qualified majority voting only if there is a decision by unanimity to do so.

Last night, a very useful suggestion was made by Deputy McHugh about the merits of greater engagement with members of the European Parliament across all parties and this is something that I will certainly be encouraging in the Department of Finance.

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