Barroso caved in to Irish threat on tax, claim MEPs

MEPs are accusing European Commission President José Manuel Barroso of buckling under pressure from the Irish government and reneging on a promise to propose a common method for calculating corporate tax.

The proposal, they say, has become hostage to Ireland’s referendum on the Treaty of Lisbon, planned for May or June.

Barroso has removed the proposals from the Commission’s strategic priorities for 2008, apparently mindful of Ireland’s referendum.

Charlie McCreevy, the European commissioner for the internal market who was previously Ireland’s finance minister, has been campaigning inside the Commission against the idea of creating a common consolidated corporate tax base (CCCTB). McCreevy, who is a member of Ireland’s ruling Fianna Fáil party, depicts it as a step towards harmonised tax rates.

"McCreevy is threatening Barroso," said Pervenche Berès, chairwoman of the European Parliament’s committee on economic and monetary affairs. "The Irish are using the threat of this referendum on the reform treaty to make sure that nothing happens."

The European Parliament yesterday criticised what it took to be Barroso’s backsliding. Voting on the Commission’s priorities for next year, MEPs said: "[Parliament] regrets that the Commission is not intending to propose an initiative regarding the creation of a common consolidated corporate tax base, which would increase competition between member states as far as attracting investment is concerned."

Berès said that without the CCCTB as a Commission priority it would be difficult to achieve a discussion.

László Kovács, the commissioner for taxation, told MEPs on Tuesday (11 December) that a CCCTB proposal would still be published, but after the summer break. He said that two-thirds of member states supported a CCCTB. He expressed readiness to introduce proposals through enhanced co-operation if there was no unanimity among member states. Under the 1999 Treaty of Amsterdam, member states may use enhanced co-operation to proceed in adopting laws in areas like taxation which would normally require unanimity.

Irish Fianna Fáil MEP Brian Crowley said that introducing the proposals by enhanced co-operation would be in breach of past treaties and the Treaty of Lisbon. "The treaties are quite clear that unanimity is the rule as regards taxation in the EU. That’s the basis on which the Irish people will be voting in the referendum," he said.

Crowley denied that McCreevy had been acting on behalf of the Irish government within the Commission, describing the battle as one of ideological rather than national differences. "It is his fundamental belief that we should reduce the tax burden on individuals who are working and on businesses creating wealth," he said.

Ireland can count on support from the UK and Slovakia, which have maintained their scepticism during various discussions about a CCCTB, notably at informal meetings of the EU finance ministers in September 2004 and April 2006.

Slovakia, which pioneered a low flat-rate tax, has strong reservations about a CCCTB. A Slovak diplomat said: "The ministry of finance of the Slovak Republic still doesn’t think that the project, which should [lead] to the simplification of the situation [for] multinational companies carrying out business in the...internal market, is very favourable at the moment. The risks of CCCTB implementation are very big."

A Commission spokesperson said that the Irish position was "incomprehensible". In a recent study conducted by auditing firm KPMG, she said, 85% of businesses had supported a CCCTB. "If they have such fantastic businesses, then why are they afraid?" she said. The preparatory work for next year’s proposal, she said, was still going ahead.

Another Commission source said that the Commission was not delaying things for fear that the reform treaty would not be ratified. "There is a distinction in the work programme of picking strategic priorities and then normally around 100 other priorities. I would find it surprising if it were a strategic priority," he said.

Berès said that Barroso did not want the dossier to throw up problems while he was seeking a new mandate as Commission president. "Barroso does not want to get into a difficult dossier and thinks this is going to be one," she said.

MEPs are accusing European Commission President José Manuel Barroso of buckling under pressure from the Irish government and reneging on a promise to propose a common method for calculating corporate tax.