Éamon Ó Cuív (Galway West, Fianna Fail)

I wish to share time with Deputy Brian Lenihan. The 12.5% rate of tax has long been a cornerstone of Irish industrial policy and I urge the Government in the strongest possible terms to withstand entreaties from our partners in Europe on this issue. I fear that any movement on the rate, even by a half a percentage point, would send a detrimental message to the inward investment community.

Above all, what any investor craves is certainty. Any movement whatsoever on the rate would destroy this certainty. From an investor perspective once the rate moves once, even if only marginally, there is nothing to stop it moving again. The resulting uncertainty and lack of confidence would be fatal to attempts to attract investment, create employment and grow the economy.

There was a good reason no sunset date was announced at the time of the introduction of the 12.5% tax rate. This is not an incentivised rate. It is not a tax holiday rate. This is simply the standard rate of corporation tax in Ireland. The message was clear and unambiguous, that is how Ireland chooses to do business. The 12.5% tax rate has the blessing of the OECD. It was introduced with the blessing and agreement of the European Union and it does not discriminate based on ownership, industry or activities. The only requirement is that there is an active trade. A similarly clear and unambiguous message must be issued by the Government and I acknowledge and applaud recent statements in this regard.

As anyone involved in the foreign direct investment sector is aware, tax is only one of a variety of factors taken into account by foreign multinationals when developing and implementing international expansion plans. Having a low tax rate for corporate profits does not win projects or investment. It is well known that in many other jurisdictions it is possible to get tax holidays and not pay any corporate tax whatsoever. Having a low rate merely makes Ireland competitive and gets us to the table. What wins investment is our flexible and open economy, the availability of skilled labour and the productivity and industry of our people.

Having worked so hard to attract investment over the years, Ireland is in many respects in an enviable position. It has a proven track record of providing a stable and reliable location from which to do business. It is the only English speaking member of the eurozone. It is home to marquee names and household brands, factors which attract interest and oftentimes further investment from other players and competitors. This work would be undone in one fell swoop even by a seemingly insignificant change to the corporate tax rate.

Typically, Ireland competes primarily with Switzerland and Singapore for the type of investment it secures. It is clear that any deterioration in Ireland's competitiveness vis-À-vis these jurisdictions would likely result in investment being lost by the EU as well as by Ireland. The prospect that France and Germany would reap an inward investment windfall if Ireland were to double its corporate tax rate is not based in reality and it is unlikely that France or Germany would contend otherwise. The primary beneficiaries would likely be non-EU countries.

We received a little more clarity on the next line of attack on the Irish tax system last week with the European Commission proposal and draft directive for a common consolidated corporate tax system. Although only a proposal at an early stage, it requires careful monitoring. It reminds me of the old nursery rhyme about the spider and the fly. No doubt the Minister will remember it. It runs: "Oh come into my parlour said the spider to the fly." We all know what happened to the fly once it became enmeshed in the web. I fear the Government's amendment and approach will ensure Ireland will wind up like the fly in the famous nursery rhyme.

What the common consolidated corporate tax base, CCCTB, seeks to do is reallocate profits earned by companies that operate in the CCCTB territories according to various factors such as physical assets, sales, payroll and employees. Interestingly from an Irish perspective, there is no allocation based on intangible assets, placing companies that have invested significantly in the creation and exploitation of intellectual property at a considerable disadvantage. The introduction of the CCCTB is clearly an attempt to take the rate out of the equation by allocating profits based on a new system, one that is completely incompatible with existing taxation and accounting principles and with the hundreds of the tax treaties currently in existence. These profits would then be taxed at the tax rate applicable in those territories.

As this proposal should be resisted in the strongest possible way, the terms of the Government's amendment in this regard are worrying. Any reduction in the interest rate being charged by the EU and IMF would be welcome and I would applaud the Taoiseach and the Government if it achieved such a result, but it is imperative that it not be achieved at any price. The 12.5% corporate tax rate and no CCCTB for Ireland is a line in the sand we should not cross in pursuit of a short-term gain on the interest rate. Its effect on corporate policy and our ability to attract long-term investment would be detrimental. Therefore, if a short-term gain were to lead to a significant long-term erosion of our competitive advantage in terms of the level of certainty we enjoy and the success we have built thanks to our current industrial policy, we should not sacrifice the long term for the short term. I will now share the rest of my time with Deputy Lenihan.

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