Joe Costello (Dublin Central, Labour)

I am delighted to have the opportunity to speak on the motion on the report of the Standing Order 103 Select Committee on the proposal for a Council directive on a common consolidated corporate tax base.

Deputy Tóibín is not quite correct in what he said about the Department of Finance. When we met the Department officials in the committee, they emphasised that it was their preliminary advice that this might not be in breach of subsidiarity. However, we do not know at this time what is their final position. The Deputy also mentioned the Labour Party, Fine Gael and Deputy Hayes engaging on the tax issue and the bailout. That is what we are doing. We always said we would engage on it and are in the process of doing that. We do not throw out the baby with the bath water. We are engaged with Europe and accept we are members of Europe. There is not much sense in being, as Sinn Féin is, in favour of the motion but not prepared to argue the case coherently and rationally. Rather, it attacks the parties on the other side. We need more cohesion and rationality in arguing the case on Ireland's behalf.

The principle of subsidiarity is the most fundamental principle governing the operation of the European Union. Article 5(3) of the Treaty of the European Union states: "The Union shall act only if and insofar as the objectives of the proposed action cannot be sufficiently achieved by the Member States." Now, for the first time, under the Lisbon treaty national parliaments are being given the power to determine what constitutes the principle of subsidiarity. This is a legal power, but not a legal decision. It is a political decision, an Oireachtas decision and a decision of all the parliaments in the 27 member states. We decide, not the Commission or the Council. We make up our minds and if enough of us make up our minds that this infringes on the principle of subsidiarity, the matter must be rectified by the Commission and the Council. That is the power we have. For the first time ever, we are the watchdogs of policy-making in the European Union. We must engage and must be rational and reasonable. That is what we are doing.

What Deputy Flanagan has presented to us are the arguments put forward by the committee. These are the rational arguments for why we say this infringes the principle of subsidiarity. This is the first time ever this has been done. I regret we were not able to do it earlier, because of the election and the unfortunate situation where the Seanad has not been convened. In that case we would have had two votes, rather than the one we have currently, but, unfortunately, that is the situation. I have expressed my concerns that the eight-week period was too short for each parliament to make its determination in committee, go through the plenary process and then campaign with other member states. Unfortunately, that was the situation and we must make the most of it. Now, all legislative proposals emanating from the EU Commission must satisfy the principle of subsidiarity and be subject to that test.

The original purpose of the CCCTB proposals was to facilitate cross-border trade by having a centralised mechanism for tax assessment in the EU countries in which the traded goods are sold and a centralised formula for the allocation of that tax, based on sales, payroll, number of employees and assets of companies. Allocating taxes on this basis would be a significant change from the status quo. Theoretically, the proposal would redistribute the tax base between member states, while the member states themselves would continue to set their own corporate tax rates. However, if the impact of the proposal on member states altered their revenue stream, tax rate adjustments would have to be made, which could amount to an indirect interference in the control exercised by member states in the setting of their tax rates. This would be a clear breach of the principle of subsidiarity.

What is signally missing from the proposals is any evidence that the CCCTB will achieve the objective intended, namely, to facilitate cross-border trade between the member states. Big businesses and multinationals do not need assistance to conduct business in many countries. They are adept at doing so, as that is their nature. It is the small and medium businesses that require assistance in conducting cross-border trade efficiently and at a reasonable cost. However, it is difficult to see the value of a harmonised tax assessment mechanism, based on the tax returns from the country where the produce is sold, as having any benefit for the promotion of cross-border trade. It is unclear how this can be a solution. Indeed, it may well be counter productive. It may impede the countries of origin, where the business is based and where the goods are produced, from setting their own corporate tax levels as they consider appropriate to suit their particular business model. Small and medium enterprises need assistance in accessing a variety of markets in a number of countries, but they would be best served by a one-stop-shop offering financial and regulatory assistance and business direction, rather than any form of tax harmonisation.

Far more detailed information is required before all the implications of a cross-border proposal of this nature can be adequately assessed as to the benefitsit might have and whether EU-wide action is necessary to achieve the objective of the proposal. Research proposals from Ernst & Young, mentioned earlier, have shown that Ireland would be among a group of six countries that would benefit least, while France and Germany would be among a group of larger countries that would benefit most. Interestingly, France and Germany are the main protagonists of the CCCTB.

There are serious questions to be asked with regard to this proposal in the context of subsidiarity. We require much more detail, a much wider argument, much more information on the benefits to be obtained and much more information as to whether what is supposed to be achieved would be achieved by the mechanism as proposed.

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