Priority Questions.

Financial Services Regulation.

Richard Bruton


83 Deputy Richard Bruton asked the Tánaiste and Minister for Finance if he is satisfied Ireland has robust mechanisms in place to anticipate and deal with a crisis in an Irish financial institution; and if he will make a statement on the matter. [23770/07]

As the Deputy will be aware, the most important safeguard of financial stability is the existence and effective operation of the financial regulatory and supervisory regime. Following the establishment of the Central Bank and Financial Services Authority of Ireland in 2003, encompassing an independent Financial Regulator responsible for prudential supervision of financial institutions and consumer protection, we have such a system in place in Ireland. The Central Bank and Financial Services Authority of Ireland integrates within a single institutional structure both the supervision of individual financial firms by the Financial Regulator and the monitoring of overall financial stability, which is the independent responsibility of the Governor of the Central Bank. This structure yields significant advantages in terms of monitoring and maintaining financial stability in ensuring effective and timely co-ordination of these two key functions.

It is important to emphasise that the framework for financial regulation here is shaped by a detailed and comprehensive template which applies across the EU. There have been a number of positive assessments of the effectiveness of our system of financial supervision. A recent report from the International Monetary Fund, a body that carries out comparative examinations of financial regulation internationally, acknowledged the strengthening of the financial regulatory and supervisory system in Ireland in recent years.

The Financial Regulator adopts a risk-based approach to the supervision of financial firms, targeting its supervisory resources on those businesses and sectors with higher risk profiles and with the propensity to have the greatest impact in the event of failure. In doing so, it must balance a number of key objectives including the safety, soundness and competitiveness of industry, and it must facilitate innovation.

In the current financial market environment, the most important point that needs to be made in the national context is that Ireland's banking system is well capitalised, profitable, liquid and soundly regulated in this regard. I look forward to the publication of the Central Bank's 2007 financial stability report in November, which will set out the bank's current assessment of the financial environment.

There are obviously important lessons to be learned from recent events in international financial markets. This process of review and examination is already under way. At the recent ECOFIN Council on 9 October, EU Finance Ministers agreed on a set of common principles and a roadmap of further actions to enhance financial stability arrangements and the ability of authorities to respond to serious disturbances in EU financial markets.

Additional information not given on the floor of the House

Ireland will of course participate fully in this work to ensure there is an effective EU-wide system to maintain financial stability, taking into account the important cross-border linkages that now exist in EU financial markets. My Department is continuing to work closely with the Central Bank and Financial Services Authority of Ireland to oversee national financial stability planning arrangements in line with EU requirements.

It is also important to note the key role of the Central Bank and Financial Services Authority of Ireland operating within the overall context of the Eurosystem and the European Central Bank in maintaining financial stability overall. The Governor of the Central Bank and Financial Services Authority of Ireland has recently highlighted the fact that the euro area operational framework has functioned well in response to recent financial market developments.

I am satisfied Ireland has an excellent regulatory regime and a solid and robust banking system.

I think people will agree that in recent months we have seen the unthinkable happen — a run on a bank where many Irish people had deposits, a huge fall in the value of Irish financial institutions on the stock markets because of fears of excessive exposure to the property market and the collapse in value of the new securitised instruments. How would we deal with a crisis if it occurred? It is significant the Minister did not address that question in his response, but dealt solely with the part of the question concerning anticipation. Does he believe changes need to be made to our deposit protection scheme, which is now much worse for Irish depositors in financial institutions than applies in the United Kingdom scheme, which was triggered by the Northern Rock collapse? Does Ireland need to manage its exposure more robustly, for example, by examining the issue of risk management?

As the Minister will recall, the Central Bank's report for last year provided a series of early warning signs. It noted that credit growth here was the highest in Europe, our reliance on property-related lending was excessive, as was the level of risk-taking in certain areas, and the funding gap was widening. How does the Minister propose to pre-empt any possible threat to an Irish financial institution?

Developments in the financial system are taking place against a background of strong economic fundamentals. We have a well capitalised, liquid, robust and financially sound banking system, which has withstood recent turbulence in international markets ably and well.

Lessons must be learned in terms of the globalisation of markets and we need to examine these matters, including the issue of deposit guarantee, with our European Union partners. In a recent case in Britain a particular bank encountered difficulties to which the Chancellor of the Exchequer responded in his own way. Our approach must be to take a considered view of these matters and work with our EU colleagues within the EU template of supervision and the financial regulatory regime currently operated in the euro area. We will probably see the outcome of deliberations on these matters by the middle of next year.

While I do not oppose working with EU colleagues, the greatest area of concern relates to the Irish property market. Financial institutions here have experienced the greatest fall in revenues. For this reason, rather than waiting for the slowest mover in the European Union, it behoves us to examine what action we can take to get our house in the best possible order. I ask the Minister specifically to consider the possibility of providing deposit protection. In this difficult period and with a credit crunch under way, savers need assurance that their deposits are safe. The Minister should not wait for the slowest partner in the EU to move.

It is not a question of waiting for the slowest mover in the European Union but of recognising the state of health of the Irish financial system. I spoke to those involved in the system and they continue to regard it as robust. With regard to the downturn in the property market to which the Deputy referred, stress-testing is being carried out by the financial institutions and there has been no increase in stress in terms of mortgages in the financial institutions etc. Those involved in the markets and those working with people who have purchased property will confirm that we still have low unemployment and a high rate of disposable income, and consumers attach a high priority to repaying mortgages.

The system here has withstood the turbulence we have observed internationally because it is in robust health, liquid and well capitalised. Working with other countries in the euro area does not mean postponing consideration of these matters. We will work with our partners to ensure an EU-wide approach is adopted which provides protection to all of us, particularly in light of the globalisation of markets. Recent developments affect all markets, not only the Irish market.

Tax Yield.

Joan Burton


84 Deputy Joan Burton asked the Tánaiste and Minister for Finance his estimate of the deficit and outcome for 2007 in view of the reduction in receipts of certain taxes, including stamp duty, as disclosed by the Exchequer returns; the changes this may give rise to in respect of spending profiles as outlined by him in budget 2007; and if he will publish Revised Estimates for 2007. [23765/07]

Exchequer tax receipts to the end of September were €31.462 billion, which was €490 million or 1.5% below profile. Based on the results to the end of September it appears likely that tax receipts will be up to €1 billion or about 2% below the budget day target. This deficit is largely accounted for by lower than expected receipts for stamp duty, capital gains tax and VAT, which reflects the change in the residential property market as it returns to more normal levels of activity. Excise duties are also expected to be below target whereas income tax and corporation tax are expected to exceed targets. However, the expected shortfall in tax revenue will be offset to some extent by positive developments on other elements of the Exchequer account.

At the end of September voted current expenditure was broadly on target, while voted capital expenditure was 8% ahead of profile. It is expected that at the end of the year total voted expenditure will be on target. Based on the overall end of September position, an Exchequer deficit of up to €1 billion is projected for 2007 compared to a budget day forecast of €546 million. This week I will lay the pre-budget outlook containing the pre-budget Estimates before the House when I will update my economic and fiscal projections, including my tax forecasts, for the years ahead and outlining the estimated cost from 2008 to 2010 of maintaining public services at existing levels.

Do the figures not indicate that the party is over? On budget day on 5 December the Minister will face a number of difficult choices, namely, whether to ditch some pre-election promises or to cut spending. According to his statement on the returns, his spending priority centres on productive potential. As this means something must give on the spending side, will it continue to be the health service, in respect of which we hear horror stories on a daily basis? Will the Minister indicate to the House his opinion on what will give on 5 December?

This year we have not seen spending cuts. Year on year, there has been an increase in spending.

Cuts in services.

A criticism from the other side of the House, depending on which side of the debate one is on, is that too much is being spent. In the interests of good budgetary discipline, we are trying to ensure all voted expenditure will come in on target, which is the best way to maintain improvements in services year on year. To do otherwise would be to put the improvements at risk, which would be in no one's interests.

The programme for Government sets out clearly that we are working on the basis of a budgetary policy that seeks to maintain a broad budgetary balance. All spending commitments are made in this context because we must maintain improvements, keep unemployment at low levels, continue progress and achieve growth in the economy. Our budgetary stance as outlined is consistent with the discussions that took place.

Concerning productive potential, expanding the productive capacity of the economy is important because we must continue to identify areas that can sustain growth. This should be given priority and would be consistent with the national development programme in terms of the capital investment programme and the contribution it can make to offsetting next year's unexpected reduction in the residential property market's output compared to this and previous years' historic highs.

In previous budgets I ensured the general government balance was in surplus. I hope there will be a similar situation this year. By having room to manoeuvre in good times, one can deal with a situation as it arises. My pre-budget outlook will outline the updated opinions of the Department in respect of prospects for growth.

The Minister referred to the NDP which stated the Government would keep growth in spending in line with estimated overall growth in the economy in GNP terms. Does he mean to keep to this commitment? On Thursday will he outline to the House the estimate for economic growth next year and revise the figure downwards, as the Exchequer figures appear to suggest?

According to the Department's figures, growth in current expenditure was between 11% and 13% due to Fianna Fáil's pre-election splurge. Even the best estimates for economic growth next year are approximately 5% or 5.5%. Will the Minister stick with the commitment outlined in the NDP, namely, that overall growth in expenditure will be determined by expected growth in GNP? In that case, with current spending outcomes running at between 11% and 14%, something has to give. Can he indicate what will give on budget day?

As I already noted, I will outline on Thursday the pre-budget outlook in terms of our economic and budgetary forecasts for the next several years. It is clearly the case and it has been widely noted that a drag exists on growth because of the reduction that has occurred in the residential property market over the past number of months. That will be reflected in projections for next year and subsequent years.

In regard to the national development plan, I have always said it is important to maintain the capital programme because that is the way in which the productive capacity of the economy can be expanded. If one looks at the national development plan, one will see an indication of increased investment on the capital programme next year vis-à-vis this year because that is how we have set it out.

My question concerned current spending.

It is interesting that the Labour Party spokesperson on finance is saying that we are spending too much on public services when the critique before the election was that funding was inadequate.

Richard Bruton


85 Deputy Richard Bruton asked the Tánaiste and Minister for Finance the extent of the deterioration in the public finances since budget 2007 was presented; and the implications for Government policy ambitions. [23771/07]

The Exchequer account recorded a deficit of €3.1 billion in the first nine months of the year compared to a deficit of €136 million in the same period last year.

While the Exchequer balance at the end of September had worsened in comparison to the same period in 2006, this was not unexpected. The budget day forecast was for an Exchequer deficit of €546 million in 2007 compared to a surplus of almost €2.3 billion last year. The extent of the deficit so far this year is somewhat more than anticipated and is due largely to tax revenues being €490 million below profile and expenditure being €274 million above profile at this stage.

As indicated at the end of September's Exchequer returns, there is likely to be a shortfall in overall tax revenues this year of up to €1 billion reflecting developments in taxes such as those relating to the property market. While this will be offset to some extent by positive developments on other elements of the Exchequer account, an Exchequer deficit of up to €1 billion rather than the budgeted deficit of €546 million now seems likely.

While taxes are likely to be below profile this year, it must be remembered that we still expect to collect more than €48 billion in overall tax revenue this year, which is an increase of approximately 5.5% on last year's very strong performance. This significant level of tax revenue enables the Government to continue to provide for improved day-to-day public services, as well as contributing towards the cost of the roll-out of the national development plan.

It should be noted that the public finances remain in good health generally. On the European measure, a general Government surplus is likely to be recorded again this year, the tenth year in the past 11 that this has been the case. This is an impressive performance by any standards. The debt-to-GDP ratio is likely to remain at the second lowest in the euro area, in line with the Government's long-term priorities.

Later this week, I will publish my pre-budget outlook which will set out in more detail the emerging revenue and fiscal position that we face. This will be an important step in the delivery of a unified budget.

I wish to probe the issue in regard to housing as the cause of the fall in receipts. The Tánaiste predicted during the weekend that approximately 65,000 houses will be built, which represents a drop of almost 30,000 from the peak. Does his Department concur with the analysis that the impact on revenue of such a fall would be €1 billion for every 10,000 houses, or €3 billion? Are we facing a €3 billion shortfall in next year's revenue, compared to this time last year? That shortfall does not even take into account stamp duty, which pertains to second-hand sales.

In its manifesto, the Government set out spending commitments for 2008 of €2 billion to cover issues such as indexing, taxes and reducing PRSI, as well as 4,000 new teachers and 2,000 gardaí on a phased basis. Is the Government now in a situation where it will have to postpone those commitments or will it proceed with them?

With regard to the programme for Government, it involves a five-year term. The programme for Government was based on the assumption of being able to achieve an average annual growth rate of 4.5%. We may not achieve that rate next year but the programme should be considered over the five-year period. This is all predicated on maintaining an overall budgetary policy of broad budgetary balance which is important in sustaining existing improvements, quite apart from making the right choices regarding other elements one might wish to introduce consistent with having a responsible budgetary policy.

On housing output, based on demographics one would expect that a sustainable level of housing output, once the adjustment that is under way has been made, will be between 60,000 and 70,000 per year. The question of when this adjustment will be completed is still being examined. The measure of housing output mentioned by the Deputy is broadly correct. The shortfall in stamp duty at the moment is around €400 million but one should remember that excise duties and capital taxes comprise around 15% of total tax revenue while the big four taxes constitute at least 84%. This is the context for this matter.

I am sure the Minister is aware that while he says the shortfall in stamp duty is €400 million all of this occurred in the past four months. This is an indication of a rapid deterioration in stamp duty. The Minister has accepted the €1 billion per 10,000 new starts and this suggests there may be tax difficulties next year. Does he anticipate revising the manifesto commitments in some respects so that we would have a more realistic view of what the Government now believes can be achieved with the revenue that is likely to be available?

We are in the first six months of a new administration. Certainly, there will not be the added buoyancy in tax revenues that applied in the past and an adjustment is taking place in the residential housing market that must be completed to allow for a soft landing. The sustainable level of housing output, based on demographics, demand and so on, is reckoned to be between 60,000 and 70,000 per year. We must examine, therefore, the manner in which this adjustment can take place in a way that does not militate against the continuing health of the property market. This is something we can do based on the economic fundamentals that exist because it is clear that we cannot consider a continuing housing output of 90,000 per year, as was the record set last year.

Our projections in the last budget for the performance of the economy this year allowed for housing output to be eased to a level of around 70,000 to 75,000, rather than the output level of 60,000 to 65,000 that is expected now.

Decentralisation Programme.

Richard Bruton


86 Deputy Richard Bruton asked the Tánaiste and Minister for Finance if the abandonment of a proposed decentralisation project by him represents a shift in Government policy on decentralisation; and the deadline he has set for implementation of the proposals on State agencies. [23772/07]

There is no shift in Government policy on decentralisation. The programme states that the Government will continue to move ahead with decentralisation and ensure that no public servant is obliged to accept decentralisation against his or her wishes and that promotion opportunities remain available.

I assure the Deputy that this remains the case and that the Government has not abandoned any decentralisation project. I assume the Deputy is referring to the relocation of posts to Kildare town by the Office of the Revenue Commissioners. The Revenue decentralisation project to relocate 380 posts to Kildare town will go ahead. The chairman of the Revenue Commissioners wrote to me outlining some business continuity issues regarding the relocation of that office's full information and communication technology, ICT, function to Kildare town. I agreed in principle to an alternative mix of 380 posts for the Kildare location and have asked the chairman to submit a formal proposal setting out a revised mix of posts.

The decision to consider an alternative mix of functions that Revenue will relocate to Kildare town is further evidence that the decentralisation programme is vibrant and flexible enough to adapt to changing business needs as they arise in the detailed implementation phase while ensuring delivery of the commitment to the towns included in the programme.

With regard to the State agencies, the decentralisation implementation group, DIG, noted in its most recent report that the pace of progress on the State agency part of the programme continues to be slow. The Government has always recognised that this aspect of the programme presents different challenges from that of the Civil Service but is determined to make progress towards the objective of moving the State agency posts as announced. I anticipate considerable progress on this element of the programme over the lifetime of the Government.

The decentralisation implementation group has always emphasised the central role of the board and management in each agency in driving the decentralisation programme forward. The group considers that all agencies should now, at a minimum, have initiated HR recruitment policies to support the programme, begun to put phased timeframes in place and be actively securing advance and-or permanent accommodation solutions in the decentralised location.

The Labour Court, in a recent recommendation relating to the dispute between FÁS and SIPTU, stated its belief that the policy of effecting decentralisation on a voluntary basis could best be achieved if individuals who are unwilling to relocate are provided with realistic alternative career options. The court went on to say that it believes that the appropriate authorities should address the issues arising in the broader context of decentralisation of non-commercial State bodies overall.

This aspect of the Labour Court finding is very much in line with the previously expressed view of the decentralisation implementation group. The Labour Court recommendation provides a renewed opportunity for both unions and management to address the relevant issues and my Department has been in contact with ICTU to explore how progress can be made on this aspect of the recommendation. As I have previously stated in the House, I remain confident that, through dialogue and negotiation, progress can be advanced.

Additional information not given on the floor of the House

In the meantime, the decentralisation information group has asked my Department to analyse each specific location to assess the overall number of posts to relocate, the full potential pool of applicants if transferability between agencies were in place in the future, the scale of the remaining staffing gap and available options for filling the gap. The group has also asked for an update on the scope for individual agencies to form advance parties in the new locations. In this regard, issues surrounding the costs and business effectiveness of a dual location over the transition period will need to be examined.

The group is also continuing with a series of meetings with the CEOs of individual agencies and the Secretary General of the parent Department in each case.

It is an innovation to see a proposal on decentralisation being abandoned because the business case for the proposal did not stand up under examination. Does the Minister agree that one of the problems with the decentralisation proposals as published was that no business case was presented for any of the moves? Is that not, therefore, the reason we see zero progress with regard to the State agencies? The Government did not present or consider the business case. It is not surprising then that these agencies are moving at a snail's pace, as admitted by the Minister.

The Minister says "appropriate authorities" need to make suggestions about how the process can be moved forward. Is the Minister not the appropriate authority? It is up to him to make an offer on transferability of people working in State agencies so that some career possibilities are available for people who want to remain in Dublin. However, he has made no move whatsoever to break the logjam and that is the reason there is no progress on State agencies.

I would not agree there has been no progress whatsoever with State agencies. There has been some, but it has been slow. One of the reasons for the slow pace is the industrial relations issue outlined by the Deputy, which was only recently resolved in the context of a Labour Court recommendation between FÁS and SIPTU, when the issue arose in connection with FÁS.

With regard to the Revenue move to Kildare town, as the Deputy knows, the idea is to move headquarters, including ICT facilities, to various locations. The issue in this case was that the ICT unit was to be moved to Kildare town, while maintaining Revenue headquarters and staff in Dublin. The Revenue Commission brought this to my attention. It has been very successful in all its decentralisation processes to date and all its previous moves worked well. It is one of the best examples of what can be achieved with determination and good will to proceed. I was prepared to listen to the case put forward by the Revenue Commission, on the basis of an alternative mix, which would see up to 380 personnel move to the town concerned.

With regard to State agencies, the Labour Court now suggests that the appropriate authorities, which include people in my Department, the public service with responsibility for moving forward the process, the Irish Congress of Trade Unions, stakeholders, partners and the social partnerships, should consider the situation of State agencies generally, rather than segment each State agency to see how decentralisation can be brought about for it in isolation from the other agencies. The full range of infrastructural capabilities existing within the State agencies concerned should be considered. I believe this is a sensible approach.

The decentralisation implementation group has been suggesting this position. The problem was that we could not engage on the issue because of the outstanding industrial relations issue, which was before the Labour Court and the Labour Relations Commission over the past months and years. That issue has been resolved and certainty has been provided to staff that nobody will be asked to move involuntarily and alternative career opportunities will be offered to those who do not wish to move. The only way we can advance beyond this is by taking up the second part of the recommendation of the Labour Court, which is to enable a discussion to take place that would examine everything taken together. Having written to congress and with congress meeting in executive committee, I am sure it will come back to me as soon as possible with suggestions as to how we can start that engagement, which I regret has not started already.

I call Question No. 87 in the name of Deputy Richard Burton.

I wanted to ask a supplementary question.

We are more than a minute over time. I will allow a very brief supplementary question and ask the Minister to be very brief in response.

The truth is that in some cases we have no volunteers for any of these programmes four years on, yet this process is supposed to be completed. The Minister has made no suggestion to the people he says have to make a move. It is up to him to do so. It is a Government programme, yet the Minister is making no suggestion to the people concerned. That is the problem. The Minister must show leadership; it is not for the Irish Congress of Trade Unions to deliver Government policy.

As the Deputy is aware, an initiative cannot be taken when an industrial relations issue is the reason no one is engaging. That issue has now been dealt with. I have written to the Irish Congress of Trade Unions and asked for discussions to take place quickly.

Regarding the agencies involved, they have established a presence at nine locations, although not to the degree one would seek.

They are all new recruits and staff on promotion. That was never the intention of the decentralisation programme.

The intention was to move that many posts out of Dublin, including existing, new and recruitment posts.

Tax Code.

Richard Bruton


87 Deputy Richard Bruton asked the Tánaiste and Minister for Finance the implications of recent moves in the EU to create a new basis for calculating corporate tax liabilities; and if he will make a statement on the matter. [23773/07]

When discussing the plans that the European Commissioner for Taxation and Customs Union has for a common consolidated corporate tax base, it is important to not only address the implications for Ireland but also to address the implications for the European Union as a whole. It is also important to note that as of now only technical work is under way; the Commission has not made any final proposal, the Council has not considered any proposal and many member states are opposed to or sceptical towards the proposition in general.

The implications of the proposition, as we understand it, are that if such a proposition were implemented, it would offend against the principle of national sovereignty in fiscal matters and create serious potential difficulties at national and EU level. In terms of general principle, the position of the Government is clear and well understood. The right to choose how one is taxed is not a matter only of economic or industrial or social policy but also a civic right of the citizens and taxpayers in a member state. In this way, each member state can decide on its overall level of public expenditure and how this will be financed.

As regards practical implications, greater tax harmonisation could lead to the creation of a less competitive, high tax economic entity in regard to other economic blocks. A less competitive European Union means that business will move out of Europe and the competitiveness of the Union would suffer. Moreover, the most likely "sharing mechanism" under the common consolidated corporate tax base would dole out the taxes from multinational firms not on the current basis of where they are located but on the basis of a formula based on assets, sales and payroll expenses — factors that better reflect "old" rather than "new" types of industry. This would also mean that profits generated through the production of goods and services in, for example, Ireland would be at least partially taxed in other member states — export oriented member states would suffer under such a system.

The common consolidated corporate tax base would be inflexible. It would hamper individual member states from taking account of local needs, while making it extraordinarily difficult for Europe as a whole to adapt to changes in the international business and technological environment in the global business cycle. Under the common consolidated corporate tax base, agreement would have to be reached by all participating member states if one participating member state wished to change any part of its corporate tax rules.

Although it is argued by proponents of the idea that each member state could retain discretion over its national tax rate, the effect of the operation of the "sharing mechanism" would be that each internationally oriented firm would be taxed at a whole range of different rates in different member states — no member state would retain discretion to determine the actual tax rate for its firms. In other words, national tax policy would not be replaced by an EU policy; in fact, there would be no policy at all. This would probably then be used as an argument for an EU level single tax rate.

Additional information not given on the floor of the House.

The other "antidotes" suggested to the inflexibility inherent in the common consolidated corporate tax base proposition are that some decisions would be made in committees by qualified majority voting and even that there might have to be some co-ordinating EU tax authority. These would be ineffective mechanisms in terms of policy flexibility which would further erode national choices. The real antidote to tax policy inflexibility is to retain national discretion.

It should also be remembered that European member states not only compete for FDI with each other but also with countries outside the European Union. Higher corporate taxes and less flexible systems would lead to reductions in foreign direct investment, especially in smaller more peripheral economies.

None of this means that we are opposed to working at EU level to improve the business tax environment through the elimination of barriers to trade within the Internal Market. In common with a number of other member states we actively support the work of the Commission in addressing real priorities such as VAT fraud and place of supply, the work of the "Code of Conduct Group" in relation to harmful tax practices, the removal of financial services barriers, and other areas where the Single Market can be completed to the benefit of all of the European Union.

The Government, in co-operation with other member states, will continue to engage with the European Commission in a constructive and positive manner in regard to tax matters — that is the role of responsible EU members — but we will also uphold the principles in which we and others believe, in terms of subsidiarity, national discretion and competitiveness.

At the weekend the Minister described economists as highly dangerous people and quoted Leonid Brezhnev. I presume it is that source that is designing this——

The Deputy knows that was a joke.

I always knew the Deputy had a sense of humour.

I presume it must be someone from that source whom he believes is designing this corporate tax structure. The Minister will be pleased to hear I agree with him when he suggests a system where, effectively, bureaucrats will decide where profits arise and are taxable is unworkable and should not be accepted but I want to ask him about two points arising from his comments. The Minister indicated there is little support among member states for this proposal. At the same time, however, he is taking considerable time to address it in a major speech. Is he satisfied there is not growing support for some key states to move off individually to create this on their own? Has the Minister looked at the specific impact on Irish revenues if this new averaging system for calculating was put in place?

There is no formal proposal on the table. Technical work has been done at Commission level and has been brought to the ECOFIN Council from time to time. Commissioner Kovács indicates the level of progress but nothing definite has been suggested at this stage. Most people are courteous in listening to that, as we should be, not indicating outright disapproval since no proposal has been made yet. The work, however, continues and often it is interpreted that because the work is continuing, everyone will be happy at the end of the day.

I have consistently outlined the practical reasons that I do not agree with the proposal. There is a lot of work that should be done to improve taxation within the EU in terms of VAT fraud, the code of conduct and the introduction of a single financial services area. There are many issues with some prospect of an outcome that we should work on with the same determination but I am not convinced this will be approved by everyone. Unanimity will be required for its approval.

It is important that Ireland alerts all member states and the European Union. It is not just about how we see it, I honestly believe this is not good for Europe and would express that view in the context of any policy that is being formulated. There have been indications from the directorate general of the Commission that it would proceed with the proposition until there is something concrete. I have a problem with it. I have no specific calculations because there is no proposal in front of me but the Deputy can rest assured it would be detrimental.

Is it possible for a group of states to adopt the idea and proceed on their own once that group reaches a minimum size? Could it emerge without unanimity if a group agreed to strike out on its own?

It has been suggested, as a way of getting around the inflexibility inherent in the common, consolidated corporate tax base proposition, that some decisions would be made in committees by qualified majority voting and that there might be some co-ordinating tax authority across the EU. We believe those would be ineffective mechanisms in terms of policy flexibility which would further erode national choices. The real antidote to tax policy inflexibility is to retain national discretion.