Tax Tops Ireland's EU Agenda

by Jason Gorringe, Tax-News.com, London

10 June 2008

Civil servants have told Ireland's new Finance Minister Brian Lenihan to expect conflict with the European Union over aspects of tax policy, including corporate tax and zero-rated VAT for children's clothes.

In a briefing note written by Department of Finance officials and seen by the UK's Sunday Times newspaper, Lenihan is told to expect that the issue of taxation will "dominate our EU agenda" in the coming months, especially when the French government takes over the six-month rotating presidency of the EU.

It is anticipated that France, which has expressed support for corporate tax harmonisation in the EU, will push ahead with plans for a common consolidated corporate tax base (CCCTB) in the latter half of 2008.

Ireland is opposed to any EU-level measures that would result in a loss of control over corporate tax policy, pointing to its decision to cut the corporate tax rate to 12.5% as a major ingredient in its recent economic revival.

The Finance Department memo however, believes that Ireland is coming under pressure to "change various elements of our tax code in relation to which they argue we are infringing either treaty or directive provisions”.

According to the memo, this is likely to include parts of Ireland's VAT system, particularly with regard to the zero-rating on children's clothes and shoes, which could be changed under ongoing reforms designed to simplify EU VAT laws.

The memo also detailed other concerns for the newly-installed Finance Minister, such as declining tax revenues and "emerging spending pressures".

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