Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

As the Deputy will be aware, an updated package of possible new own resources proposed by the European Commission on 20 June included a new proposal for a corporate statistical own resource based on company profits. He will also be aware that a number of officials from my Department met yesterday with Oireachtas Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach - I assume the Deputy participated - to discuss this and a number of related EU proposals. I hope this exchange was helpful.

The proposed new own resource is based on sub-components of gross domestic product, namely the application of a 0.5% call rate to the gross operating surplus statistic recorded for the sector of financial and non-financial corporations under the European system of accounts.

As such, this proposed new own resource is, in fact, an additional national contribution based on statistics, similar to the existing gross national income-based contribution that member states already pay into the EU budget. While the Commission contends it is not a tax on companies, my Department is concerned that it is premature to proceed with a proposal such as this while the OECD global tax process continues.

Ireland has continuously stressed that reforms around corporate income tax should be carried out at a global level. In addition, my Department's assessment is that Ireland would, in relative terms, be significantly impacted by this in terms of the effect on national contributions to the EU budget as compared to the existing situation because of exceptionally high corporate profitability in Ireland due to the large presence of multinationals. As proposed, own resource contributions based on the proposed gross operating surplus metric would, therefore, have a significant impact on the Exchequer, with Ireland disproportionately affected as the share of gross operating surplus in national income is much higher here than in almost any other member state.

In summary, we are among member states that believe this specific proposal fails the tests set by EU leaders on own resources when they agreed to the long-term EU budget in July 2020. Any proposals, they said, should deliver “simplicity, transparency and equity, including fair burden-sharing”. The new own resource proposals are presented as a package, including proposed new own resources based on the revised EU emissions trading system and the carbon border adjustment mechanism, that we broadly support. However, we cannot support the proposal for this corporate new own resource. Importantly in this context, my assessment of the situation is that, as of now, the new own resources proposals do not have the necessary unanimity of the member states to be agreed.

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