The European Council will meet in Brussels tomorrow afternoon. This meeting of EU Heads of State or Government will be the third such gathering to take place while we have held the chair of the Council of the European Union. This Council will address itself to the discussion of two thematic issues - energy and taxation - both of which are critically important to improving the competitiveness of the European economy and with it the prospects for strengthened employment and growth in Europe. I welcome President Van Rompuy's choice in putting these two issues on our agenda for tomorrow. They both represent significant inputs into our efforts to make Europe more competitive in an era of intense global competition.
Energy currently presents the EU with significant competitiveness challenges, with consumers and industry facing significantly higher prices here than in the US, for example. The Union needs to address these challenges head on. We need to improve energy efficiency; we need to complete, without delay, the internal energy market; we need to ensure that investments take place in necessary infrastructure; and we have to look to diversify our energy supplies, including looking at our indigenous resources. I commend the Minister for Communications, Energy and Natural Resources on the proactive role he has taken in his chairing of the Energy Council, including in preparation for the Council meeting tomorrow.
In our discussion on taxation issues tomorrow, the focus will be firmly on improving the efficiency of tax collection and tackling tax evasion and fraud with the aim of deepening the internal market and strengthening fiscal positions in member states. Simply put, this is an issue of fairness. We cannot, on the one hand, cut expenditure and consolidate our fiscal positions, while, at the same time, see some engaged in tax evasion and fraud. Those practices should not be acceptable at any time but they are now all the more pressing to address as exchequers across the Union strive to secure their collection bases. I am glad to report to the House that again on this issue, the Irish Presidency, in the person of Minister for Finance, has taken a leadership position on this brief, in close co-operation with Commissioner Semeta.
This week's meeting of the European Council will also adopt a decision on the size of the European Commission from next year onwards. This decision will see the EU delivering on assurances given to Ireland in 2008 and 2009 that, provided the Lisbon treaty entered into force, each member state would retain the right to nominate a member of the Commission. I warmly welcome this development.
The House should be aware that I wrote last week to each of my European Council colleagues as we enter the final six weeks of the Irish Presidency of the Council. I highlighted a number of areas on which we would appreciate further support over the coming weeks. In the margins of tomorrow's meeting, I will avail of the opportunity to follow up on some of these points in discussions with my colleagues.
The energy discussion at this month's European Council is positioned clearly in the context of the EU's efforts to promote growth, jobs and competitiveness. It therefore sits well with Irish Presidency objectives.
Affordable energy supplies are crucial to the enterprise sector which will drive growth and job creation across Europe and they are, of course, crucial for European households also.
Notwithstanding recent economic turmoil, it is estimated that energy prices for industry in Europe are up more than one quarter in real terms since 2005, more than in most other advanced economies. EU gas prices last year were on average four times higher than in the USA. The European Commission has also highlighted that the US is on its way to becoming a net gas exporter, with China set to follow also. This is, therefore, an important discussion at a difficult time.
Our exchanges will be informed by the three key pillars of EU energy policy - sustainability, competitiveness and security of supply. The nature of the energy sector is such that a holistic, long-term approach must inform all short-term and medium-term decisions. One of the messages I will bring to the Council is that it is vital that we avoid short-term solutions which might not be compatible with more long-term energy goals. I see the challenge as one of striking the right balance consistent with supporting economic recovery.
It is in this context that President Van Rompuy has indicated that there are four key questions on which he aims to focus discussion and on which conclusions will be developed. The first is the issue of energy efficiency. A clear path towards more intelligent conservation of energy resources will clearly continue to pay dividends, including innovative financing of necessary retrofitting work. In Ireland, the national energy efficiency action plan, which we produced in February, reaffirms our commitment to deliver 20% energy savings by 2020. I will address this issue at tomorrow's meeting. Energy efficiency underpins security of supply in that using less energy reduces our reliance on external sources of energy. It also encourages competitiveness through increasing our economic prosperity and addresses sustainability by reducing our carbon emissions. Energy efficiency can also play an important role in mitigating current trends in energy prices while supporting local employment, in particular in construction, with the potential creation of up to 2 million jobs across Europe.
The second is the issue of EU-level legislation. This means, in particular, driving forward our work on completing the internal energy market. It is estimated that removing remaining barriers to more efficient integration of our energy markets could generate annual savings of up to €30 billion for gas and €35 billion for electricity. I expect that identifying key implementation bottlenecks here will remain an important focus.
The third is the question of unlocking new investments in terms of modernising national infrastructures and ensuring the interconnections which will support the completion of the internal energy market by 2014 - ensuring that all member states can benefit from the enhanced efficiencies of integrated markets. It is estimated that Europe will need around €1 trillion in new energy investments between now and 2020. Current investments are actually at historically low levels so we have to make sure we have the right regulatory environment to unlock these new investments in next-generation infrastructure which can also be an important driver of economic recovery. The launch of our interconnector with the UK was strategically important for Ireland. It is a €600 million project supported by the European Investment Bank adding 500 MW to Irish electricity supply by linking the all-island and UK markets and underpinning the potential for export-led development of our significant renewable energy resources which greatly exceed European averages.
The fourth issue flagged by President Van Rompuy is a related one, namely, the diversification of energy supply. He highlights both the geographical spread of EU imports and stronger development of indigenous resources. In this regard, I will highlight tomorrow the importance of meeting renewables targets and the consequential shift in the EU-wide generation mix. Ireland is at the forefront of integrating renewable energy and plans to have 40% of electricity consumption delivered by renewable energy in 2020.
Evidently, the issues in play here are very far-reaching. The world is undergoing a major energy transformation and Europe must shape its own clear response. This will mean proceeding carefully, but with a sense of purpose, and I expect that our exchanges will be constructive.
It is also clear that completing work on the internal energy market will remain of overriding importance and will continue to underpin all three pillars of EU energy policy. The Irish Presidency has already set the clear goal of agreeing conclusions on the Commission's internal energy market communication at the June Energy Council in Luxembourg. This week's European Council can be seen as providing important political orientation for that ministerial discussion next month.
As chair of the energy formation of the Transport, Telecommunications and Energy Council, the Minister for Communications, Energy and Natural Resources, Deputy Pat Rabbitte, met last Friday in Brussels with President Van Rompuy to discuss the outcome of the informal meeting of energy Ministers that took place in Dublin last month, with a view to contributing to the preparation of our discussions on energy policy tomorrow.
I have been encouraged by the recent developments and the resolve expressed by various member states, the EU institutions and globally to tackle tax fraud and evasion. To this end, I share the perspective of President Van Rompuy that it is important that we now seize the current political momentum at EU and international levels to improve the efficiency of our tax policies.
These recent developments include the announcement by Luxembourg on 10 April that it will apply, from 1 January 2015, automatic exchange of information as defined in the Savings Directive 2003/487 EU on interest payments to residents of other EU member states; the recent statements by a number of EU member states, and separately by the G20, that automatic information exchange should be the international standard; the Commission action plan to strengthen the fight against tax fraud and evasion, which prioritises agreement of the revisions to the savings directive and the mandate for negotiations with European third countries; and the agreement by Ministers at ECOFIN on 14 May on a mandate for the Commission to enter into negotiations with EU third countries on amendments to the savings tax agreements. This agreement represented welcome progress during the Irish Presidency on an issue that had been stalled for some considerable time.
We are working toward widening the scope of the savings directive and towards the global standard of automatic exchange of information to ensure solidarity between member states, a level playing field and, ultimately, a fairer environment for our citizens who are carrying a heavy tax burden. Progress on the revised savings directive and on the agreements with the five EU third countries will be a significant step in EU and international moves to tackle tax fraud and evasion.
While it was not possible to achieve final agreement on the revised savings tax directive at the May ECOFIN meeting, we will continue to work with a view to reaching political agreement on this. It is intended that next month's ECOFIN Council would also adopt the Presidency VAT anti-fraud package.
As EU Council President, we have been front and centre in pressing issues related to tax fraud and evasion, including our chairing of the working party on tax questions which deals with these issues. Like all EU member states, Ireland believes in fair tax competition and building on the work of the OECD global forum on tax transparency and the code of conduct on business taxation. Unfair tax competition is an issue that needs to be addressed.
The Minister for Finance, Deputy Michael Noonan, and Commissioner Šemeta jointly wrote last month to the members of the ECOFIN Council to set out seven key areas where concrete action to combat tax fraud and evasion can be delivered in the short term. Considerable progress has already been made on these measures, with four of them having already been adopted. The Irish Presidency is convinced that agreement on all seven measures is essential in tackling trans-national tax fraud and tax evasion. This has been, and remains, a priority for our Presidency.
There has recently been considerable international interest in the taxation of the digital economy. It is clear that the digital economy has moved at a pace that international tax rules may not have fully kept pace with. While this issue needs to be looked at, the only way for measures to be effective is for countries to work together to examine these issues and to consider how international rules can be amended to ensure fair levels of taxation. This is being done at the OECD through the base erosion and profit shifting process, and this is the appropriate forum.
Before concluding on taxation matters, I must make it very clear that matters of direct taxation remain the sole competence of member states and Ireland would not support an alteration to the unanimity requirement in this area. This view is shared by most member states.
Taxation is a powerful economic tool and retaining the right of member states to decide taxation rules and levels allows member states to take account of their differing positions in the economic and business cycle.
It is clear that when it comes to combating tax evasion and fraud, a great deal can and should be done in close co-operation with our EU and international partners. As the holder of the EU Council Presidency, Ireland has been and will remain at the forefront of these efforts. In this regard, I warmly welcome the priority that Prime Minister Cameron has given to co-operation on taxation issues ahead of next month's G8 meeting in Lough Erne, County Fermanagh.
As I have mentioned, tomorrow's European Council meeting will adopt a decision on the size of the European Commission from 2014 onwards. The House will recall that the provisions of the Lisbon treaty stipulated that the number of Commissioners would fall from 2014 onwards unless the European Council decided unanimously this would not be the case. That is exactly what happened in December 2008 and June 2009, when the European Council noted the concerns of the Irish people with respect to the Lisbon treaty and agreed that, provided the Lisbon treaty entered into force, a decision would be taken in accordance with the necessary legal procedures to the effect that the Commission would continue to include one national of each member state. I warmly welcome the decision being taken tomorrow. It represents yet another clear case of the EU delivering on its promises to the Irish people.
I mentioned at the outset that I wrote last week to each of my colleagues in the Council as we enter the final stages of the Irish Presidency of the EU. I expressed my appreciation for the excellent level of co-operation we have received. I also highlighted a number of areas on which we would appreciate further support over the coming weeks. To this end, I identified a range of files on which we hope to make progress, including measures that will boost employment and help businesses to grow. Some of the measures in question are in the Single Market area, especially the digital Single Market. I highlighted the importance of concluding a draft negotiating mandate for the transatlantic trade and investment partnership between the EU and the US to keep up the momentum on this golden opportunity to give the economies on both sides of the Atlantic a real boost through a comprehensive trade deal.
I have sought the continued support of my EU colleagues for our efforts as the holder of the EU Presidency to reach a final agreement with the European Parliament on the multi-annual financial framework. A seven-year framework would contribute to the restoration of stability in the Union. It would show Europe and the rest of the world that we are serious about putting in place a medium-term budget for the Union to fund the wide array of areas on which we look to the Union, including research and innovation, the Common Agricultural Policy, cohesion, support for small and medium-sized enterprises, including through the COSME programme, and investment in infrastructure. I will follow up on each of these points with my colleagues in the margins of tomorrow's meeting in Brussels.
I intend to play a proactive and constructive part in tomorrow's meeting in both of my roles. I refer to my role in Ireland's holding of the Presidency of the Council and my national role. I will do that throughout the discussions on each of the agenda items. By dealing with the issue of energy policy and combating of tax evasion and fraud, we can contribute much more to improving our competitiveness and thereby supporting employment and growth across the Union. I will, of course, report back to the House on this meeting of the European Council.
