Billy Timmins (Wicklow, Fine Gael)
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I welcome the Minister of State, Deputy O'Dowd. The appearances of the French President, Mr. Sarkozy, and the German Chancellor, Mrs. Merkel, in the past few months have become more frequent. Each time they appear on the plinth in Berlin and Paris there is a certain hope the crisis in Europe will abate and we will have a resolution, but, unfortunately, that has not happened to date. Today we have reached a crescendo and there is almost a feeling that the gun is being put to our heads. There are shades of the night of the bank guarantee in 2008 and we believe we are being gang-whipped into accepting something we may regret in the future.

There are two main issues to be raised. I note that the President of the European Commission, Mr. Barroso, has stated today that we should approach the impending summit with an attitude of what we can do for Europe, rather than what we cannot do. It is very important that each country, Ireland included, should protect its self-interests. I will refer briefly to our corporation tax policy. I am delighted that the Tánaiste and Minister for Foreign Affairs and Trade gave a commitment on that issue today, as the Taoiseach has also done. I wish the Taoiseach and his team well at the summit in Brussels. It is vital that we protect our corporation tax rate and under no circumstances should we compromise on the issue. It is equally important that we do not compromise on the common consolidated corporate tax base, on which we agreed to enter consultations. That is understandable, as it is important that it be placed on the table, but it is equally important that we do not compromise on the policy.

Before the implementation of the Lisbon treaty, the French President attended the French Embassy - I was present on the occasion - and the first issue he raised, as head of the country which held the EU Presidency at the time, was the responsibility of each country for its own tax policy, with which he said he had no intention of interfering, which is as it should be. It is not necessary for fiscal discipline purposes to have a harmonised tax policy. However, since the passing of the Lisbon treaty in a second referendum, particularly in the past 12 months, President Sarkozy has been very disingenuous and keeps placing the issue in the ether. This is not helpful to us as it causes uncertainty in multinational companies. It is within President Sarkozy's power to reduce the French corporation tax rate to match that of Ireland if he so wishes, but I ask him to keep his hands off our tax policy and urge the Taoiseach and the Government to ensure our policies in these two areas are not changed.

Two proposals have been brought forward at the summit, one being the Von Rompuy proposal to use one of the protocols to the Lisbon treaty to put measures in place to assist the achievement of discipline. There is pressure from France and Germany to go one step further and implement a new treaty, which may end up being the case. If it comes to pass, we must use a bargaining tool in our self-interests to gain a change in policy on our debt such as a write-down or a change in the interest rate being charged. It only stands to reason we should do this, as fighting another referendum campaign would prove very difficult.

Although people speak about losing sovereignty, the measures recommended by the IMF and the troika should have been implemented in this country long ago. Many broadly welcome such measures. Since the foundation of the State we have shown that we cannot manage our own monetary matters, particularly or even exclusively under Fianna Fáil-led Governments.

Fergus O'Dowd (Louth, Fine Gael)
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I thank the Deputy for raising this very important matter which I am taking in the absence of the Minister for Finance, Deputy Noonan, who is unavoidably absent.

I will begin by outlining the background to our 12.5% corporation tax rate and its importance to Ireland. I will then outline the background to the common consolidated corporate tax base, CCCTB, proposal before differentiating between the proposal for a CCCTB and the corporation tax rate issue in the context of recent developments.

Since the 1950s Ireland has used its corporation tax strategy to encourage the growth of domestic business and attract foreign direct investment. The 12.5% corporation tax rate is critical to supporting our economic recovery and employment growth. Any move towards converging or harmonising the rates of company tax would substantially damage Ireland's ability to attract foreign direct investment and hence our ability to grow our way to economic recovery. Furthermore, certainty is a key element desired by investors and abandoning the commitment to the 12.5% rate would be seen as a major change in policy. It is central to our industrial policy and an integral part of our international brand. The commitment to the 12.5% rate was restated in the Minister's Budget Statement when he made it clear that there would be no change. This reiterates most of the comments made by the Deputy.

Members will be aware that the proposal for a CCCTB was published on 16 March. A CCCTB would essentially introduce new common rules for calculating company taxation across the European Union and replace the universally accepted separate accounting with arm's length pricing method for allocating group profits across borders with a sharing mechanism under a system known as formulary apportionment. The Commission argues that a directive is needed to tackle tax obstacles that are barriers to the completion of the Single Market and which place additional costs on businesses which trade across borders. It is worth reiterating that the explanatory memorandum to the CCCTB proposal specifically states there is no intention to extend harmonisation to tax rates and that each member state will be applying its own rate to its share of the tax base.

Ireland's position on the CCCTB is that we remain sceptical of the proposal, but we are constructively engaging in the policy and technical debate. We are not alone among member states that are sceptical about the proposal, but all member states are participating in the technical debate. As has been stated on a number of occasions, despite our scepticism about the merits of the proposal, the Government's view is that it is vital that Ireland is represented in the debate as only by actively engaging in the process can we ensure we will bring all issues of concern to the table. Our approach to translating constructive engagement into practice has involved a number of different aspects. First, the Department of Finance and the Revenue Commissioners are examining the Commission's proposal to assess the potential impact not only on the Exchequer position, but also on whether it is rigorous enough to stand up to the requirements of a modern tax system. Second, we are engaging in the EU Council working party on tax questions. The third element of our approach is to engage with Irish business representatives and our EU partners on the dossier to examine how they feel the proposal may impact on them. Engagement with our EU partners allows us to build a pan-European picture of the potential impact of the current proposal and areas where there may be some difficulties. This last step will be vitally important prior to and during the Irish Presidency of the European Council from 1 January 2013.

Members will be aware that a Dáil select committee examined the issue in May and following its examination, the committee determined that the CCCTB was in breach of the principle of subsidiarity. Nine member states with a total of 13 votes voted that the CCCTB breached the principle of subsidiarity. This, however, fell short of the treaty requirement for 18 votes which would have forced the Commission to re-examine whether the CCCTB was in conformity with the principle of subsidiarity. The Vice President of the European Commission responded to the reasoned opinion of Dáil Eireann on 20 October last. That response is available to all Members.

Billy Timmins (Wicklow, Fine Gael)
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I was always supportive of Europe and this country's involvement in Europe. We spoke about a two-tier Europe in the past but I am concerned that it is becoming a three-tier Europe of the EU, the eurozone and within the eurozone, France and Germany.

I note in the Minister's response that in a further letter this week to President Van Rompuy, Mrs. Merkel and Mr. Sarkozy called for greater progress on the proposal for a CCCTB in the context of what is being referred to as a renewed contract between euro area member states. The Minister went on to say that as this is central to the current discussions by Heads of State in Brussels that he is precluded from making any further comment. I strongly urge him to pass on a clear message to Government and the Taoiseach that to give up or compromise on CCCTB is the equivalent of compromising on our corporate tax rate, and that it is equally as important. Notwithstanding that, it is important that we ensure fiscal discipline on monetary and economic policy in the Union. A deterrent must be introduced. The rules of the Stability and Growth Pact were broken by some of the larger countries, some of whom are to the forefront in seeking discipline now. It is important that we find a solution, but it is equally important that we protect our interests. The corporate tax rate and CCCTB are vitally important. We cannot let either of them go, because if we do, this country will become an outback in Europe.

Fergus O'Dowd (Louth, Fine Gael)
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I again thank Deputy Timmins for his comments. We have declared a willingness to participate constructively in the discussions on the common consolidated corporate tax base, CCCTB, draft directive and in the structured discussions on tax policy co-ordination in the framework of the Euro Plus Pact. We are committed to active engagement on the tax dossiers because only by actively engaging can we absolutely ensure a full and comprehensive discussion.

That engagement has no impact whatsoever on our corporation tax rate. In fact, the draft proposal on the CCCTB specifically states that there is no intention of extending harmonisation to the rates. We remain steadfastly committed to the 12.5% corporation tax rate on companies' trading profits, which is a central element of our strategy for an export-led sustainable economic recovery. I assure Deputy Timmins that I will bring his comments to the attention of the Minister for Finance, Deputy Noonan.