Timmy Dooley (Clare, Fianna Fail)

I welcome the opportunity to contribute to this debate. In the last Parliament I was a member of the Oireachtas Committee on European Affairs as well as the Oireachtas Committee on European Scrutiny. It is probably the first time we have seen the provisions of the Lisbon treaty being used to deal with a very important issue. I thank the committee for conducting its business quickly in this instance.

The committee's remit was to consider whether the CCCTB proposal meets the requirement in regard to subsidiarity; it was not charged with examining the likely outcomes of the proposals. In that regard the committee was somewhat hamstrung in terms of what it could achieve. The committee has concluded that the proposal does not meet the subsidiarity requirement. It will be a matter for other parliaments to take their decisions on that and we will then see how the provisions of the Lisbon treaty are applied in practice. Only then will we able to establish whether they are to the benefit of the State in terms of where we see this debate going.

I accept that the Government is committed to the retention of the 12.5% corporate tax rate, as alluded to by various members of the Cabinet and by the Taoiseach on many occasions both inside and outside the House. That is welcome and in line with successive Government policy. Of equal importance is the protection and retention of our tax base. Any measure or decision that would erode the base will have an impact on our capacity to generate the types of taxes that are required to assist us through this difficult period. I am not sure, however, that we will win the subsidiarity debate in the long run if it were to be dealt with on a broader European basis. I am somewhat confused as to why the Government is proposing to enter into dialogue with its counterparts at EU level as part of a greater debate on this issue.

We all accept that the Government is over a barrel in terms of commitments it has made, particularly the desire to reduce the interest bill on the bailout. While that is laudable, we must be careful of our negotiating stance. We on this side of the House have a responsibility not to goad the Government into taking a position that would ultimately be to the detriment of the country. The interest rate is one thing, but we should steer well clear of entering into any dialogue that might ultimately dilute our position. The point has been made by various Government speakers that it is important to involve ourselves in the debate and that dialogue is the appropriate way forward. However, for an issue of such vital national importance, we must at the outset raise the red flag. We must, from the very beginning, invoke our right to the use of the veto, making it clear we are not prepared to enter into dialogue nor to countenance any changes to the way in which taxes are apportioned or collected which might impact on our capacity to trade out of the difficult situation we are in.

I would prefer to see the Government park the issue and to suffer the minor consequences associated with not attaining the interest rate change immediately. The question of the interest rate will be dealt with in due course. We must not cede any type of authority in regard to moving the CCCTB debate along. All of the reports on the CCCTB proposal, including that carried out by Ernst & Young on behalf of the Department of Finance and published in January, clearly show there will be winners and losers under the model and that Ireland will be a significant loser. Given our current fiscal situation we must steer clear of anything that might undermine our position in any way.

The report by Ernst & Young highlights lessons from the experience of the United States with combined reporting and the apportionment by formula of various tax measures. The overriding theme is that the adoption of a consolidated tax base with a uniform apportionment is unlikely to be either uniform or stable over a period of time. It is the view of the authors of the report that the same will apply, and probably to an even greater extent, in Europe because of the different measures that will be adopted by member states. The EU undertakes to respect the tax sovereignty of member states and if corporate tax competition continues to increase in the way it has in the past, what might be set out as the goals or objectives of this proposal will fall by the wayside and probably lead to greater disparity and greater difficulties in the future.

We should also look to the findings of the IBEC report that a CCCTB would result in higher compliance costs, higher effective tax rates, uncertainty regarding tax rates and damage to the EU as an investment location. In addition, the Commission's proposals are based on the old economic model and optionality would be unlikely to happen in practice. Taking these findings into account, I am confused as to why the Government continues to indicate a willingness to participate in a discussion with EU partners on this matter. The Taoiseach recently described CCCTB in this House as harmonisation of corporate tax rates through the back door. However, the Government has signalled its willingness to enter serious discussion on the CCCTB. There is an element of speaking out of the both sides of the mouth on its part but I can understand why that is the case, particularly in the context of a desire to secure a quick decision on the reduction of the bailout interest rate. That issue has moved on considerably because of what has happened in Portugal and Greece and, more recently, because of what has happened to IMF personnel. Perhaps the demand is not as great to find a resolution to this matter. There is an opportunity for the Government to assert its position and, in particular, to assert the necessity to protect our corporate tax base by putting forward the potential for the use of the veto at the earliest stage, recognising that any changes require unanimity. Clearly, if Ireland is diametrically opposed, as it would appeared to be based on what various speakers have said, to this proposal, there is no necessity to enter dialogue in the first place. That is why there is no point having constructive engagement because that would lend credibility to the Commission's argument in the first place.

Over the weekend, the Minister of State at the Department of Foreign Affairs, Deputy Creighton, said the position of the French had hardened. The previous speaker correctly pointed out that while France has a 33.3% corporate tax rate, its effective tax rate is significantly lower at 8.1% according to the World Bank and PricewaterhouseCoopers report on paying taxes in 2011. While, on the one hand, the French have adopted a strong approach to force Ireland to make a change, they have a different perspective on their own rate. Literature produced by the French equivalent of the IDA, the Invest in France Agency, boasts of France having a low corporate tax rate. It states France's corporate tax regime is just as competitive as countries such as Ireland and cites the World Bank report for that claim. The French system has a range of tax breaks and incentives, including credits for hiring older workers or setting up in a poorer region. The most important is the research credit of 30%, which, as the agency notes, is more attractive than Ireland's 25% tax credit and represents one of the most generous in the world.

We are hearing a great deal of noise from France, in particular, and there has been a push towards a CCCTB for some time. While the French are setting out that the proposal is necessary and Ireland is a rogue state in the minds of some because of the approach it has taken to reduce its corporate tax rate, they are well ahead of the game and they are clearly trying to benefit more. The report on the CCCTB demonstrates that France would be a big winner to a tune of an increase of 6% as a result of the formula contained in the proposal. I urge the Government parties to walk away from their suggestion to engage in constructive discussion and to be clear that the veto will be used from the outset and that there is no necessity whatsoever to countenance any move towards a CCCTB.

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