EU Misinformation: Barroso, Bonde and Ireland’s company Taxes

Monday 28 April 2008

Barroso, Bonde and Ireland’s company Taxes . . . Excerpt from “Bonde’s Briefing” by Jens-Peter Bonde MEP, Chairman, Independence and Democracy Group in the European Parliament, forwarded for your information

Misinformation in Ireland
I was in Ireland this weekend (18 April). Accidentally I met the Commission President José Manuel Barroso at the University of Cork. I had two other meetings. He made a splendid speech, particularly when he went outside his manuscript.

It became clear to me that his civil servants had agreed a part of his speech with the Irish Government representatives to mislead Irish citizens about a hot issue in the Irish debate: their low corporate tax at only 12.5 %.

Mislead is a strong – but very precise – expression. Barroso said there was nothing new in the Lisabon Treaty about taxes.

This is positively wrong. The new Art.113 TFEU(Treaty on the Functioning of the EU) about taxes adds a new phrase of “and to avoid distortion of competition”as an amendment to the Article. This is a clear invitation to the European Court of Justice to outlaw the very distorting low Irish rate.Today the EU is only competent to harmonise tax laws under Article 113 if it is “necessary to ensure the establishment of the internal market”. With this Lisbon Treaty amendment the EU can also harmonise tax laws if competition is distorted – this is a much wider concept. When is competition not distorted by differences?

In a new special Protocol to the Lisbon Treaty, “Protocol on the Internal Market and Competition” (No. 4), it is also added that the Internal Market “includes a system ensuring that competition is not distorted”. National hindrances can be outlawed, even by legislation based on the so-called “Flexibility clause” referred to in this Protocol.

In Art.116 TFEU distortions of competition can be hindered by laws decided by qualified majority voting in the Council. First, the Commission consults the distorting Member State. Article 116 then provides: “If such consultation does not result in an agreement eliminating the distortion in question, the European Parliament and the Council, acting in accordance with the ordinary legislative procedure, shall issue the necessary directives. Any other appropriate measures provided for in the Treaties may be adopted.”

In the Reader-Friendly Edition of the Consolidated Treaties which I have edited (see euabc.com ) the text in bold is the new addition to Article 113 on corporation taxes made by the Lisbon Treaty: “and to avoid distortion of competition”. Hindrances may be eliminated by majority voting.
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. It is not difficult to foresee an attack from another country – or company. The French Presidency has already signalled its plans for taxation before they enter into office 1 July.The Irish Government has criticized the French intentions. Well, the tax issue is also included in the annual work program for Barroso’s European Commission for 2008!

“Work will also be continued in order to allow companies to choose an EU-wide tax base as set out in the 2008 Annual Policy Strategy. An impact assessment has been launched to examine the options and their implications”,it is said at page 7 of the Work Programme.The Commission will only publish their proposal – after the Irish referendum. All controversial proposals are delayed before referendums. This is normal practice for the Commission. It is only un-normal that the method has been leaked to the press with the publication of a private e-mail from a British diplomat referring to information received from the Irish Government in confidence.

The Commission is working on a proposal to harmonise – maybe not the rate, but the base for calculating corporate taxes. The economic effect for Ireland may be the same.

Ireland has earned a lot on multinational companies settling in Ireland but selling products to the whole of the EU. Now, the Commission proposal – according to rumours – will distribute profit for taxation according to the spread of the turnover.

It does not sound surprising – or unjust – to me. This is the way the Commission is thinking – in spite of the Barroso speech to calm the Irish voters before their referendum scheduled for 12 June.

A joint rate will require unanimity, yes. But to outlaw the low rate in a Court verdict only requires a simple majority in the EU Court of Justice in Luxembourg. It is mis-leading not to tell the Irish the full truth about the Lisbon Treaty and taxation.

Even new direct taxes for the Union could be introduced by the Lisbon Treaty. See Art. 311 TFEU on the establishment of new Union “own resources” by unanimity among Member States.

“…it may establish new categories of own resources”, it is said in the new Art. 311 inserted by Lisbon.

It is also said stated: “The Union shall provide itself with the means necessary to attain its objectives and carry through its policies”.
< http://www.bonde.com/index.php/bonde_UK/article/bondes_briefing_23042008 >

A Note on Jens-Peter Bonde MEP

The author of the above statement, Jens-Peter Bonde, Danish MEP, has just edited a “Reader-Friendly Edition of the Consolidated Treaties as Amended by the Treaty of Lisbon“. This shows the additions to the two main EU Treaties that would be made by Lisbon in bold type, and the deletions in strikethrough.
This volume contains an invaluable index which will enable anyone interested in a particular topic to find easily the Consolidated Treaty Articles relating to it and to see how these would be affected by any deletions or additions made by the Lisbon Treaty.

This Reader-Friendly Edition of the Lisbon Treaty is now downloadable free from bonde.com.
Bonde has also written a short 100-page book describing the background to the Treaty and giving a general analysis of it: “From EU Constitution to Lisbon Treaty”. This will be downloadable later this week from the web-sites: bonde.com and euinfo.ie
Jens-Peter Bonde was a member of the Convention on the Future of Europe which drew up the original EU Constitution that would now be brought into being indirectly rather than directly by means of the Lisbon Treaty. He has been an MEP since the first direct elections to the European Parliament in 1979 and he is retiring from the Parliament on 9 May, Europe Day, having recently reached his 60th birthday. He first came to Ireland in 1986 to express support for the late Raymond Crotty in his constitutional action on the Single European Act, which led to the current referendum on the Lisbon Treaty. He is chairman of the Independence and Democracy Group in the European Parliament to which Munster MEP Kathy Sinnott belongs. He has written some 40 books on EU-related topics over the years and is widely known and respected for his tireless work over decades for a more transparent, less centralised and more democratic European Union. Together with Ireland’s John Gormley and others he produced a minority report on an Alternative to the EU Constitution at the close of Giscard d’Estaing’s Convention on the Future of Europe in 2004.
For enquiries contact Anthony Coughlan at 01-8305792.

Jens-Peter Bonde himself may be contacted at the European Parliament at 00-32-2-2845167 and at Jens-Peter.bonde@europarl.europa.eu

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