Joe Sherlock (Cork East, Labour)
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Question 66: To ask the Minister for Finance the amount in corporation tax paid by the banks and other financial institutions in the latest year for which figures are available; his views on whether this represents a fair return in regard to the huge profits now being made, particularly by banks; and if he will make a statement on the matter. [7203/05]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I am informed by the Revenue Commissioners that the estimated corporation tax paid in 2004 by banks and other financial institutions was of the order of €1,300 million. This figure is significant, representing almost 25% of our total corporation tax take of €5,334 million in 2004. This covers banks, their Irish subsidiaries, banking activities in the IFSC, insurance companies and building societies. The amount does not include foreign tax paid by Irish financial institutions in respect of their overseas operations, which is likely to be significant.

As the Deputy will be aware the 12.5% corporation tax rate enjoyed by companies in Ireland is a general measure which applies to a company's trading income. In this regard it would not be appropriate, under EU state aid rules, to impose a higher corporation tax rate on the profits of the banking sector.

As the Deputy is no doubt also aware, the Finance Act 2003 provides for a special three year contribution from the banking sector. This provision has already yielded €206 million and also applies for 2005.

Tommy Broughan (Dublin North East, Labour)
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Question 67: To ask the Minister for Finance the Government's position in relation to a proposal put forward by the European Commission that the proportion of value added tax currently paid into the Union budget by member states should be increased; and if he will make a statement on the matter. [7148/05]

Brian Cowen (Laois-Offaly, Fianna Fail)
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There is in fact no such proposal from the European Commission at this time. The Commission has invited Council to discuss the options suggested by the Commission for direct EU taxation to fund, in part at least, the Union budget from 2014 onwards. In putting forward this suggestion, the Commission has identified VAT as one of three options for that direct EU tax.

Currently, the EU budget is financed by traditional own resources, mainly customs duties, a notional VAT resource whereby a common rate is applied to each member state's harmonised VAT base and a GNI related resource whereby a common rate is applied to each member state's gross national income. The essence of the current system is that the EU budget is mainly funded by contributions from the member states, whose unanimous agreement is needed to make any change to the system.

In a report published last July, the Commission considered a number of options in relation to the future financing of the EU budget. These were maintaining the current system; abolishing the current VAT resource in favour of greater reliance on the GNI resource; or introducing a direct EU tax to finance the budget. The direct EU tax approach was favoured by the Commission, which proposed that it be introduced from 2014.

Three options for such a direct EU tax were put forward by the Commission: A tax on energy consumption; the application of an EU rate to actual national VAT bases; or a tax on corporate income. While not expressing a distinct preference for any one of these options, the Commission noted that an EU tax on corporate income would require the most preparatory work.

With specific regard to the VAT option, the Commission envisaged that this would be implemented through an EU rate as part of the national VAT rate paid by taxpayers and on the same taxable base. The Commission suggested that the EU VAT and national VAT should appear as separate taxes on the invoice or receipt that a taxable person provides to a customer. It was not envisaged by the Commission that the overall VAT burden on citizens would increase as the EU rate would be offset by an equivalent decrease in the national rate.

Virtually all the member states, including Ireland, have clearly expressed their opposition to a new direct EU tax to finance the budget. In their view, the current system is efficient, effective and reasonably equitable though there might be some scope for improving matters on that latter point. Debate has centred instead on the other two scenarios outlined by the Commission for financing of the budget. These are retaining the current system or abolishing the current VAT resource and going to a more emphatically GNI based system. As they think the latter scenario would be more equitable, transparent and administratively less burdensome, Ireland and a majority of member states favour the more GNI based option.

The final decision on the Commission's proposals will form part of the agreement on the future financing of the EU for the period 2007-13. The current negotiations on future financing are due to conclude in a political agreement at the European Council next June.

Seán Ryan (Dublin North, Labour)
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Question 68: To ask the Minister for Finance if an assessment has been done of the likely implications of the recent decision of the European Court of Justice which found against the Revenue Commissioners' interpretation of VAT rules on canteen food sales; the anticipated loss to the Exchequer as a result of the ruling; the amount that it is likely that will have to be repaid; and if he will make a statement on the matter. [7201/05]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I assume the Deputy is referring to the recent decision of the European Court of Justice concerning Hotel Scandic, a Swedish company which was about to provide subsidised meals to its employees. There has been no European Court of Justice case involving the Revenue Commissioners' interpretation of VAT rules on canteen food sales.

In the Scandic case the European Court of Justice found that VAT would be chargeable only on the price paid by employees for the subsidised meals. Ireland's position is not the same as that of Sweden. The charging rules in Ireland are based on a different provision of the sixth VAT directive than that at issue in the Swedish case. Ireland's rule is that the taxable amount in respect of subsidised canteens is the cost of providing the meals or the price paid by the employees, whichever is the greater. Nevertheless, the Revenue Commissioners are examining the details of the judgement to establish whether or not it has any implications for the Irish position.