Michael Noonan has accused the European Union of abdicating its responsibility to protect the interests of smaller countries such as Ireland and warned that there can be no move towards a fiscal union until it changes its approach.
Mr Noonan, the outgoing finance minister, said that Ireland was given a guarantee when it joined the European Economic Community — now the EU — in 1973 that its interests would not be ignored in favour of larger countries.
He said that the European Commission had abandoned that mandate and instead promoted the interests of larger nations at the expense of member states such as Ireland.
Mr Noonan, who was addressing the Institute of International and European Affairs in his last significant speech as minister before stepping down in the coming weeks, said that this shift in emphasis was evident in the commission’s attempts to introduce a common consolidated corporate tax base (CCCTB), to which Ireland is strongly opposed.
“One of the things that concerns me is that I’m old enough to remember the campaign when Ireland joined the European Union and at the time part of the idea was that the commission was the bulwark of interests of small countries,” Mr Noonan said.
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“That’s no longer the case. The commission doesn’t stand by small countries anymore. As far as I see now, the commission promotes the interests of large countries. You see that in the CCCTB, especially on the consolidation piece.” The government is staunchly against the proposals, which aim to introduce a uniform set of rules with which to calculate multinationals’ tax bills across the EU, and subsequently devise a new way of splitting those tax revenues between member states.
Under the proposals, businesses would pay corporation tax in proportion to their assets, employees and sales in each EU country.
The proposals do not suggest that changes be made to the tax rates of individual member countries.
Smaller countries such as Ireland would probably lose out on significant tax revenues, given that a relatively minor percentage of multinationals’ goods and services were sold into the Irish market.
Mr Noonan said that the commission had put its weight behind the proposal, which he said favoured large countries with extensive markets and disadvantaged small trading nations such as Ireland.
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He said that the prospect of developing a fiscal union across eurozone member states, as proposed by Emmanuel Macron, the French president, would become part of the European agenda in the coming months.
Without a guarantee that the EU would again protect Ireland’s interests — and those of other smaller countries — it was not a prospect that should be countenanced by Irish officials, Mr Noonan said.
“Can you have a currency union without a fiscal union? Is it possible to have a budget for the eurozone? Is it possible to have a mutualisation of debt in the eurozone and would that lead to a European eurozone finance minister who would deploy the budget and make decisions?” Mr Noonan said.
“Emmanuel Macron is very much in favour of these concepts so they’re going to become part of the European agenda in the next couple of months and there will be a debate on them.
“I’d be reluctant to rush into new arrangements on fiscal union with a European finance minister unless we had assurances that the commission would revert to previous practice, if not mandate, of standing by smaller countries and protecting their interests.”
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Mr Noonan said that the Irish economy, which is on course to be the strongest growing EU economy for the third consecutive year, was unrecognisable from when he was appointed finance minister in March 2011.
He warned that a number of risks threatened growth, including Brexit, Ireland’s high debt levels and the threat of protectionism from the Trump administration in the US. He said, however, that Mr Trump’s proposals to cut the US corporate tax rate from 35 per cent to as low as 15 per cent would not have a significant negative effect on Ireland.
He added that the White House had “gone cold” on the idea of a border adjustment tax that would impose an additional tax on all imports into the US but exclude exports, to the detriment of Irish companies selling into the US.
As such, threats from the US had “ameliorated” over the past few months but the risk posed by Mr Trump’s protectionist trade policies continued to be a concern, he said.
Mr Noonan said that the division between those with a job and the unemployed had narrowed since he took office but that more work was needed.