The Lisbon Treaty amendment on EU harmonized taxes which has not been publicly mentioned so far in Ireland’s referendum debate
Article 2.79 of the Lisbon Treaty would insert a six-word amendment -“and to avoid distorton of competition” – into the Article of the existing European Treaties dealing with harmonising indirect taxes – Article 113. The full amended Article would then read as follows:
Article 113
“The Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, adopt provisions for the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect taxation to the extent that such harmonisation is necessary to ensure the establishment and the functioning of the internal market and to avoid distortion of competition.”
(The Lisbon Treaty amendment is underlined) . . .Treaty on the Functioning of the European Union
The significance of this short but important amendment is that it would enable the European Court of Justice, which adjudicates on competition matters, to decide that Ireland’s 12.5% rate of company tax, or Estonia’s zero rate, as against Britain’s 28% rate and Germany’s 30% is a distortion of competition which breaches the Treaty Articles dealing with the internal market – Art. 26 and Arts.101-9 TFEU – in relation to which qualified majority voting on the Council of Ministers applies.
The Irish Government’s veto under Article 113 would be irrelevant if those Articles on the Internal Market are invoked as the legal basis for proposing changes in EU tax laws. All the assurances regarding unanimity underArticle 113 would then count for nothing.
Once this amendment to Article 113 is inserted, the European Commission, whose job it is to police the internal market, need only point out that the big cross-national disparities in corporation tax rates and Ireland’s reluctance to accept a Common Consolidated Tax base which would tax company profits on the basis of their sales in different EU countries, at the tax rates prevailing in those countries, constitute a prima facie “distortion of competition” under Articles 101-109.
If Ireland refused to cooperate with what the Commission wanted, the Commission could bring it before the Court of Justice – or another country or firm could institute proceedings against it – and the Court could declare the Irish Government’s tax policy to be unlawful as in breach of the EU’s Internal Market provisions.
Unanimity under Article 113 would certainly be required to introduce any joint rates of company tax, but this Lisbon Treaty amendment would give the EU Commission and Court of Justice ample extra powers to erode Ireland’s low rate of corporation profits tax, whether we liked it or not.
If an Irish-based company had 10% of its sales or turnover in Ireland and 90% in, say, Britain, its profits from its Irish sales could be taxed at 12.5% and from its British sales at 28%, under the scheme the Commission has been mooting. We might even be allowed to keep our 12.5% company tax indefinitely, but its practical benefit would be hugely eroded by proposals such as this, which this six-word Lisbon Treaty amendment is designed to facilitate.
There is no other possible reason for inserting this hitherto virtually unnoticed six-word amendment by means of the Lisbon Treaty.
Ireland’s 12.5% company tax rate, not to mind Estonia’s zero rate, just stand out as being clearly “distortions of competition” on the EU’s Internal Market.
Commission President J.M. Barroso should be asked what is the significance of this six-word Lisbon Treaty amendment to Article 113 on harmonised taxes during his two-day visit to Ireland.
By refusing to ratify the Lisbon Treaty and agree to this important amendment we refuse to hand over to the EU Commission and Court of Justice these new mechanisms to undermine the principal incentive attracting foreign companies to Ireland and keeping many of them in th country. It should be noted of course that Ireland’s low corporation tax rate benefits Iindigenous companies also, and not just foreign multinationals here.
By rejecting Lisbon and insisting on a Protocol in any new Treaty which would protect the principle of tax-competition between the countrries, we make a stand for economic freedom and reject the attempt to impose an economic straitjacket on the EU Member States in the interests of Germany, France and Britain, with their high company tax rates.
Note, incidentally, that harmonizing laws on indirect taxes in the EU is mandatory under Article 113 set out above: “The Council SHALL…”
Anthony Coughlan
Secretary
Filed under: Lisbon Treaty Referendum, Tax Harmonisation & Economic Effects | Tagged: ireland, Lisbon Treaty Referendum, tax harmonisation |
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