Noel Coonan (Tipperary North, Fine Gael)
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Question 101: To ask the Tánaiste and Minister for Finance the impact on corporate tax receipts here of the adoption of the proposed sales factor for calculating corporate tax receipts; the impact on the effective tax rate on corporate earnings here if this latest proposal for harmonised corporate tax was adopted throughout the EU; and if he will make a statement on the matter. [23562/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The Deputy will be aware that there have been no decisions taken at the level of the Council of Ministers on the harmonisation of corporate tax throughout the EU. However, a technical working group, chaired by the Commission, is working on a proposition for a Common Consolidated Corporate Tax Base. The Commission has not itself completed an assessment of the issues involved here, but we understand that the Commissioner for Taxation and Customs Union currently hopes to table a proposal sometime in late 2008.

Ireland, along with a number of other Member States, opposes the idea of creating common rules for the calculation of company profits across the EU and for allocating the taxing rights for those profits to Member States. Accordingly Ireland is participating in the meetings of the Commission technical working group strictly without prejudice to our stated position. One of the key planks of any proposition for a common consolidated base will be a sharing mechanism for allocating the consolidated profits back to participating member states. While there is evidence that the Commission is leaning towards the inclusion of the traditional factors of capital, labour and sales in such a sharing mechanism, the Commission's outline technical paper on the sharing mechanism will not be available until later this year at the earliest. Since the technical specification for the proposed sharing mechanism is not yet available it is not possible to estimate the impact on tax revenues.

However, the allocation of corporate profits on the basis of a sales factor would not in our view lead to a fair distribution of profits across the EU. In fact it would seriously disadvantage all small open export driven economies where sales into larger Member States would be taxed at their corporate tax rates. This would lead potentially to a significant reduction in corporate tax take in Ireland. Our position in this regard has been made clearly known to the Commission.

These are tax issues of importance that must be progressed at a European level. This particular proposition, however, would severely restrict the fiscal autonomy of Member States and in my view would lead to a loss of competitive advantage for the EU as a whole. As I said in a speech at the weekend, I believe that there are issues of principle and of a practical nature which all EU Member States would have to consider very carefully before moving to deal with any proposal the Commission might bring forward. I am confident that my scepticism is shared in a significant number of other Member States.