The Power-Hungry EU

“We have got a monetary federation. We need quasi-budget federation as well …

We need quasi-federation of the budget.”

European Central Bank President Jean-Claude Trichet, The Guardian, 1-12-2010

“I deeply respect our Irish friends’ independence … but they cannot continue to say ‘come and help us’ while keeping a tax on company profits that is half [that of other countries]. We cannot speak about economic integration without the convergence of fiscal systems.”

French President Nicolas Sarkozy, The Irish Times, 14-1-2011

“We have a shared currency but no real economic or political union. This must change. If we were to achieve this, therein lies the opportunity of the crisis …

And beyond the economic, after the shared currency, we will perhaps dare to take further steps, for example for a European army.”

–  German Chancellor Angela Merkel, Open Europe international press survey, 13 May 2010

“The two pillars of the Nation State are the sword and the currency, and we have changed that.”

EU Commission President Romano Prodi, The Guardian, 1999

Next month, March 2011,  the EU Commission will propose supranational legislation for a uniform system of assessing business taxes in the EU – a Common Consolidated Tax Base.

This proposal for  what are called “destination taxes”  will undermine Ireland’s 12.5% company tax rate. It put on hold in 2008 and 2009 to help get the Lisbon Treaty referendums through in Ireland.

The idea is that firms selling goods in different EU countries would pay corporation tax to those countries’ governments based on the profits on their sales in those countries, and not to the government of the country where the goods were originally made, as happens now.

Countries would continue to decide their own tax rates as at present. This means Ireland could keep its 12.5% Corporation Profits Tax for profits made on sales in Ireland, but not on profits made on sales abroad.  The attraction to foreign investors of Ireland’s low corporation tax regime would be fundamentally subverted by this step, for most of their profits would be taxed in the countries where their goods or services were sold and not in Ireland where they are produced.

This step does not require unanimity amongst all 27 EU States. It can be done  by a sub-group of nine or more Eurozone States under the “enhanced cooperation” provisions of the Treaty of Nice, even though many or most of the other EU Members are against it.  The EU institutions can then be used to  advance further integration by this sub-group. This provision drove the proverbial coach and horses through the notion which some people believed in: namely, that the EU is some kind of “partnership of equals” in which no fundamental change can be made without all 27 Member States agreeing.

In March too the European Council will finalise arrangements for an amendment to the Lisbon/EU Treaties to set up a permanent “Financial Stabilisation Fund” from 2013, to which Ireland would be expected to contribute, without allowing the Irish people to vote on it in a referendum.

The German paper Handeslblatt reports that a “historic” change of EU policy is now under way in Berlin, with Germany no longer opposing Eurozone economic government. The new plan envisages the 17 Eurozone countries being pushed towards “harmonization” of their State Budget policies.  On taxation levels, wages of public officials and retirement ages, Eurozone countries would have to commit to binding common “bandwidths”, with penalties such as fines for any breaches.

The EU/IMF loan – better called a “stitch-up” rather than a “bail-out”! –  that was pushed on the Irish Government by the European Central Bank last November puts Ireland in a weak position to resist these further transfers of power to Brussels and Frankfurt. They underline once more the folly of our joining the Eurozone in 1999, when we could have stayed outside it like 11 of the 27 EU Member States.

It is now clear to all thinking people that joining the Eurozone  was the worst and most irresponsible decision of any Irish Government – ever.

The politicians of the three main parties who pushed that ruinous course upon us are the real perpetrators of “economic treason” in Ireland, of which our emigrating young people, our 400,000 unemployed and our debt-ridden households are the manifest current victims.

N.B. Note that from 2014, just three years time, the Lisbon Treaty/EU Constitution which was also pushed on us by Fianna Fail, Fine Gael and Labour will put EU-law making on a straight population basis, with Germany’s vote on the Council of Ministers doubling from its present 8% to 17%, France’s, Britain’s and Italy’s vote going from their present 8% each to 12% each, and Ireland’s falling from its present 2% to 0.8%.

The proposals mentioned above are but a foretaste of many more EU diktats to come, once Germany, France and the other big EU States obtain this big increase in their EU law-making power.

(11 February 2011)

Lisbon Treaty: mandatory tax harmonisation for Ireland

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
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