Any attempts by the European Commission to link Irish corporation taxes to higher contributions to its budget in order to make up for substantial shortfalls will be resisted and are unlikely to succeed, according to Government sources.
The EU is facing huge financial pressures in the years ahead caused by the Covid-19 pandemic, future enlargement and the war in Ukraine, with more sources of funding currently being explored including a new levy on taxes raised by member states.
The change is one of several proposals considered by the European Commission during the summer.
It would disproportionately hit Ireland’s contribution to the overall EU budget, given Ireland’s strong corporation tax revenues – and could see it almost doubling in size, although sources have played down the likelihood of it moving from the proposal to the implementation phase.
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Ireland and other member states have already indicated opposition to, and reservations about, various elements of the package, with some of Ireland’s key concerns put forward by the Minister for Finance Michael McGrath at the ECOFIN meeting of EU finance ministers in July.
Contributions to the EU budget from member states typically come in at about 1 per cent of GDP.Over the past decade, as Irish national output has risen strongly, driven by multinational activity, the State’s contributions to the EU budget have also risen.
The view within the Department of Finance’s is that there is a substantial amount of detailed technical work to be carried out before any conclusion can be reached as to whether the Commission’s proposals chime with previous agreements, which are based on “simplicity, transparency, equity and fair burden-sharing”.
But the strongly held belief within the Government is that the proposed package does not meet those criteria and will not be adopted.
