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28th Aug 2016

Semeta urges Irish action on EU tax files

EU tax commissioner Algirdas Semeta has called on the Irish presidency to break the log-jam on proposed EU tax legislation, while saying that Brussels has no plans to harmonise national tax rates.

Speaking to the Irish parliament's finance committee in Dublin on Thursday (10 January), Semeta called on Ireland to push for a deal on several controversial EU taxation files during its six month EU chairmanship, including the savings tax directive, the common consolidated corporate tax base (CCCTB) and the financial transactions tax (FTT) - all of which have met with opposition in national capitals.

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Ireland is not among the 11 member states that will use the FTT, but its civil servants will be charged with brokering an EU deal.

It has also been among the countries to reject any attempts to harmonise corporate taxation, claiming that increasing business taxes would jeopardise its fragile economy.

EU tax competition remains a thorny issue in Ireland.

At 12.5 percent, Ireland's corporation tax rate is one of the lowest in the EU, with France and Germany among a group of countries pushing for a harmonised rate across the bloc.

There were also suggestions in early 2012 that increasing the corporate tax rate could form part of the Irish bailout package in exchange for an interest rate cut on debt repayments.

Earlier this week, Irish employment minister John Bruton repeated that the corporate tax rate is a "red-line issue" and that the government would resist any pressure to increase it.

Although the commission proposal would only apply on a voluntary basis for five years and does not specify what rate should be levied, Irish leader Enda Kenny has described the CCCTB proposal as tax harmonisation "by the back door."

Under the EU proposal, companies would be allowed to submit one centralised tax return across all EU countries in which they operate.

Their taxable profits would then be split between the member states they operate in, according to the size of their profits in each country, which would retain the right to set their own rate of tax.

Supporters of the plan say it would reduce costs and administrative burdens for businesses operating across a number of countries.

"The day of isolated tax policy is over. Coming closer together as a Union on tax matters does not threaten member states' sovereignty," Semeta noted on Thursday.

He noted the CCCTB would not affect tax rates, reiterating that it "has nothing to do with tax rates, and Ireland has nothing to fear in this regard."

"Member states must remain free to set rates and this flexibility allows a healthy degree of tax competition to be maintained," he added.

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