Congress: 'Government ceding control of tax policy to European Court'
8 Apr 2005
The Irish government's continued opposition to EU tax coordination means future tax policy for all members could be determined by the European Court of Justice (ECJ), Congress has warned.
The Congress warning follows a key ECJ judgement in a case taken by the British government against retail chain Marks and Spencer. The ECJ ruled that Marks & Spencer could offset losses incurred by foreign affiliates, against their domestic tax bill.
Paul Sweeney, Economic Advisor to Congress said: "Along with lost revenue this ruling - possibly the first of many in the absence of tax coordination - has major implications.
"If some European governments, including the Irish, continue to oppose coordination of taxation policies then an incoherent set of policies will be foisted upon member states by the rulings of the ECJ in individual cases, over time," Mr Sweeney pointed out.
The Irish government is one of the leading opponents of tax coordination between the member states of the European Union. It opposes coordination in its effort to retain the low rate of corporation tax introduced for all companies in Ireland in 2003.
Ireland opposes tax coordination because, until recently, it led the race to the bottom with low tax rates on companies. However, new member state, Estonia, has gone one better than the Irish government with a zero rate of tax on retained earnings.
"The ruling by the ECJ demonstrates that tax policy will increasingly set by the Court in the absence of coherent and coordinated tax policies made in broad agreement by the member states.
"By failing to talk and agree, member states cede power to the Court. Like all courts it will determine taxation policy on the narrow facts before it and not on broad policy issues, which include raising revenue, redistribution and incentives," Mr Sweeney warned.
He welcomed the fact that Ireland was participating on one EU committee on the tax base, but urged it to recognise the long-term advantage of coordinating policy between member states, even if this means the low tax on companies may have to be raised over time.
Ireland was one of seven countries to make representations supporting the British position, in its failed case against Marks & Spencer.
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