Corporate Tax yet again

As I warned on Tuesday, I return to the issue of the threat to Ireland's very low (12.5%) corporate tax rate.

Briefly, my summary would be that there is indeed a threat. It would be misleading, if not dishonest, to say that there is no threat and/or that the veto gives us absolute protection. Ireland has already changed the rate at least twice before, explicitly in response to EU pressure.

That said, ratification of the Lisbon Treaty will have a very minor effect, if any, upon the likelihood of that threat increasing. On the Dunphy/Giles scale, it rates well short of a platini as a reason to vote "No".

I have examined the provisions cited by Mr Bonde, and my conclusion is very much in line with the useful comment left by "fd".

Bonde describes the wording of the proposed new article 113 as significant, constituting a

"clear invitation to the European Court to out-law the very distorting low Irish rate...Today the EU is only competent to harmonise tax laws if it is “necessary to ensure the establishment of the internal market”. With Lisbon the EU can also harmonise if competition is distorted - this is a much wider concept. When is competition not distorted by differences ? "

The Treaty provisions are clear and not disputed or disputable. The EU cannot impose tax harmonisation without unanimity i.e. the veto stays. Bonde's point was not to dispute that, but to note that the Treaty adds a new criterion for the assessment of changes viz. distortion of competition. I suspect that he goes too far in suggesting that the new wording is an invitation to the ECJ to strike down Ireland's corporation tax rate on the basis of its distortionary effects, and Mr Bonde is not a lawyer. Apart from anything else, the reference to such effects in the proposed art. 113 (old number 93) is in the much more logical context of transaction taxes, like V.A.T..

However, if one asks whether it is beyond the bounds of possibility that a successful legal challenge might be mounted to the Irish tax rate, and that the challenge might derive support from the wording to which Bonde draws attention, I suspect - though I am not an expert in that field - that the answer cannot be definitive. That is often the case with "expert" answers, of course.

Mr Bonde observes that "So, if I was Irish and interested in the low corporate tax - which I am not - I would propose a strong protocol to protect the low rate."

The truth is that Ireland's negotiators probably asked for such a protocol, or at least considered doing so, but decided, perhaps wisely, not to make it a break-point.

Ireland's corporate tax rate is, and always will be, under threat. No single provision in the Lisbon Treaty directly makes that threat any greater than it already is. The French moves to which Mr Bonde refers will not cease if Lisbon falls.

All that said, if the Treaty succeeded in what some say is its main aim of "streamlining" the workings of Union government, then anomalies such as our tax rate be will less likely to survive. If one ignores the economic benefits of further integration and the reduction of barriers to trade and competition, and focusses exclusively on the tax rate, then, one could rationalise it as a reason to vote against the Treaty.

That would barely even rate a "dunphy" on the Dunphy/Giles scale though, would it ?