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... and what's the view from Dublin? Republic's 12.5% tax rate is now facing a real threat

By Brian Hayes

Published 26/07/2016

Brian Hayes
Brian Hayes

Ireland's position in a post-Brexit EU landscape is far from clear. There is no question about our commitment as a Member State, and as a member of the eurozone, but in terms of financial services and economic issues, Ireland faces dangers on several fronts. Only one week after the result of the UK referendum, the European Parliament decided once again to push its agenda for further tax harmonisation.

This is not good for Ireland, not good for the EU and certainly not good for business. More than ever, Ireland needs to be focused on staying competitive. Such moves from the EU are not helpful.

The EU's corporate tax agenda puts Ireland in a dangerous position following Brexit. On one hand, we have Britain proposing to reduce its corporate tax rate to 15% and on the other, we have to continue our battle with the EU on tax harmonisation.

Of course, we have to remain firm on our 12.5% corporate tax rate - this is a complete red line issue for Ireland.

Moreover, any attempts to harmonise tax rates through the back door must be resisted. This government, and many previous governments, must be commended on their efforts to fight hard for Ireland's corporate tax policy.

But now the fight will become more difficult. The UK was always a natural ally for Ireland in resisting the EU's tax harmonisation agenda, particularly on the proposal to have a harmonised EU financial transaction tax (FTT) and a Common Consolidated Corporate Tax Base (CCCTB).

In a few years, it is most likely we will no longer have a UK ally at the European table - a huge political setback whose importance cannot be overstated.

Whenever corporate tax issues were raised at the European Council, the UK and Ireland always took the same position, and with the UK on our side we knew that France and Germany could not extend their reach too far. It was of course Ms Merkel and Mr Sarkozy who tried to push the Taoiseach into concessions on our corporate tax rate in favour of a better deal on bailout loans.

Despite this, we still have to wait to see what kind of EU is going to emerge in the years following Brexit. This will dictate what kind of debate we are going to see on corporate tax.

Not long after the referendum, Wolfgang Schauble, the long-standing German Finance Minister, commented that Europe cannot simply operate like it did in the past.

At one level he is right. The relentless focus now must be all about getting the eurozone functioning properly. Europe has to tackle the low growth high cost narrative that too often exists around the world in commentary about the EU. But that cannot be at the price of railroading smaller Member States.

He then went on to further remark that it is for national governments to set the pace for future cooperation with the European Union and "if the Commission isn't coming along, then we'll take matters into our own hands and solve problems between governments".

Schauble is a politician who doesn't mince his words. It is clear that he wants Member States to take control and for the European Commission to take a step back. The problem is that leaving matters to the big countries, frequently means following their agenda. There is no guarantee that by cutting out the EU Commission that our situation can improve. If anything, it's the Commission that stands up for smaller Member States and understands the challenges they face.

I firmly believe that the EU institutions do need to take a good hard look at themselves and the way they operate following Brexit. National governments also need to do more to explain to people the benefits of the EU.

There is a huge wave of Euroscepticism all over Europe and not enough has been done to address this.

Brian Hayes is a Dublin Fine Gael MEP

Belfast Telegraph

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