Denis Naughten (Roscommon-South Leitrim, Fine Gael)

I wish to share time with Deputy Twomey.

I welcome the opportunity to contribute to the debate as one of the members of the committee that examined the CCCTB. The proposal has been around for the past ten years and one of its main objectives is to deal with double taxation and over-taxation of companies that operate in a number of member states. However, this has been addressed through double taxation agreements between member states and, therefore, the argument in this regard has evaporated.

The other argument made by the Commission is that the proposal would reduce the administrative burden relating to tax compliance. It states the overall net gain in GDP at Union level would be 0.02%. However, studies, including one carried out by IBEC, found that the initial cost of upgrading IT systems and retraining staff and management would have a significant impact on the overall profits of the companies that would potentially avail of changes in corporate tax rates. The proposal disproportionately discriminates against a number of member states and the greatest loser would be Ireland because our percentage take of the overall EU tax base would reduce by one sixth, which represents a significant amount in the current economic climate. This, in turn, would have a significant impact on investment and employment to a lesser degree. However, we would face a decline in GDP of up to 3.2%. This would have a significant impact on the economy in comparison to the negligible gains that could be made.

The reason it would have such an impact on Ireland does not relate to our corporate tax base but to the way the Commission has drafted its formula to balance tax rates across member states. It discriminates against economies that are built on the IT and services sectors and it is very much orientated to traditional economies that operate in large member states. The formula disproportionately discriminates against small member states because of the apportionment tax structure proposed, which does not take due account of services, financial assets and so on.

Two out of three workers are employed in the services sector in Ireland. The structure proposed by the Commission disproportionately discriminates against companies in this sector. That is a fundamental flaw in the proposal. It also disproportionately discriminates against member states with small domestic markets because the system is loaded in favour of sales within member states. The proposal, therefore, fails the subsidiarity test. It would not provide a clear benefit either to Ireland or to the Union. It is not necessary nor is it proportionate either in its treatment of member states or the Union as a whole. I commend the motion to the House.

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