I thank the Chairman. Honourable members, ladies and gentlemen, it is a great pleasure to be here today. I thank members for the invitation to debate tax issues with them.
I wish to extend my best wishes in respect of the Irish Presidency of the EU. Like many of our European partners, I am of the view that this Presidency will provide a great opportunity to foster our European agenda and advance important issues for the EU. I also wish to congratulate Ireland on the important anniversary it celebrates this year, namely, its 40 years as an EU member state. Ireland has undergone a radical transformation since 1973, developing a modern, open economy that is driven by high-tech industry and global exports. It has been an example to many of the benefits that can be derived from EU membership. It might be easy to lose sight of this in the current difficult times. Even in hard times, however, Ireland has shown that working with its EU partners and implementing the necessary reforms can pay off. Although there is still a way to go, confidence is returning. Irish exports are strong and the forecast of a growth rate of 1.1% for Ireland this year is higher than that for the overall euro area.
Maintaining the stability of its currency and financial system, creating the conditions for sustainable growth and jobs and enabling younger generations to be more confident in the future are top priorities on the European agenda for 2013. I was happy to discover during our discussions with the Irish Government this morning that these were shared priorities. As members are aware, 2013 will be another challenging year. The Commission's economic forecast shows that the EU remains in a fragile economic situation and unemployment is expected to remain very high. Although the task is huge, the Commission is confident that Ireland has the will and capacity to lead the European family towards good progress and results during the first half of the year. In that context, I wish to say a few words on how tax policy can contribute to the EU's consolidation and growth agenda and on how Ireland can both benefit from and contribute to stronger tax co-ordination in the EU.
In recent years fiscal policies have primarily been driven by the need to bring public finances back to sustainable paths. Consolidation on the scale currently required cannot be achieved through spending cuts alone. As a result, many national reforms have resulted in tax increases. The primary role of taxation is undoubtedly to raise revenues. However, through the European semester the Commission has urged member states not to lose sight of the impact that tax policies also have on wider economic and social objectives. We have recommended that member states shape their tax reforms in the most growth-friendly manner possible - that is, away from labour and towards consumption, environmental or property taxes, which are known to be less harmful to growth - broaden their tax bases instead of increasing tax rates, thereby ensuring simplicity and neutrality of tax systems; reduce corporate tax bias towards debt-financing and tax schemes which increase the debt bias of households in order to avoid financial risks; and take steps to improve the fight against fraud and evasion as a fair and efficient way to raise expected revenues.
For Ireland, the European Council's only recommendation in 2012 was to implement the measures laid down in the joint EU-IMF programme. The winter 2012 review of the economic adjustment programme clearly states that Ireland continues to make good progress, having met all of the quarterly fiscal targets so far under the programme. I am aware that - as has been the case with many other member states - the budget presented by the Government in December included some significant tax measures designed to allow Ireland to meet the agreed budgetary objectives. Elements such as broadening the personal income tax base, reducing general tax expenditures, introducing a property tax and increasing excise duty are well in line with what the Commission recommends for quality tax reforms.
The approach we have taken with the European semester clearly leaves the main responsibility for tax reforms with member states. As long as they comply with EU law, they retain full sovereignty to adapt their tax systems and set their tax rates according to their own national needs. I assure members that there is no European threat to the tax sovereignty of any member state. However, with our extremely interconnected economies, working in isolation does not pay off. It undermines national reform efforts, creates tensions and loopholes between member states' systems and weakens the Single Market. I, therefore, strongly believe that progress on tax co-ordination at EU level is in the best interests of every member state. In that context, I wish to comment on how the Irish Presidency can be of assistance in ensuring progress on major tax matters on the European agenda.
Our European social model involves combining economic dynamism with social fairness. Taxation plays an important part in this model. Fairness lies in all member states being able to collect the taxes they are due and all taxpayers paying their legitimate share. Tax evasion and avoidance are clearly an attack on this principle. Not only do evasion and avoidance deprive member states of up to €1 trillion each year, they also mean that honest taxpayers shoulder a heavier burden in order to compensate for the evaders. With this in mind, in December I presented an ambitious action plan to combat tax evasion. This was accompanied by two recommendations to member states on how to treat tax havens and how to deal with aggressive tax planning. This package sends a strong signal to the world that the EU is serious about the fight against tax evasion. We can also highlight the need to work more closely together at international fora, notably the OECD, in order to combat this serious problem. I count on the Irish Presidency to ensure that these proposals will be endorsed by the finance Ministers and that the issue will be properly debated in the context of the G8 and the G20. I also call on the Presidency to ensure rapid progress on the improvement of the saving tax directive, which is still facing opposition from two member states on the Council.
Fairness is also about each sector of the economy making an equitable contribution to public revenue. In this context, the financial transactions tax, FTT, is the epitome of fair taxation. Ireland, as much as any member state, has felt the effects of the financial sector's role in the current crisis. However, this sector carries a disproportionately lower tax burden than others. The FTT can redress the balance and ensure that the financial sector makes a fair contribution to public finances. Unanimity on the FTT could not be reached at EU level. Therefore, 11 member states have decided to move ahead together with a harmonised FTT. Although Ireland is not one of the 11 member states which signed up to the FTT, I am confident that it will facilitate progress during its Presidency. The European Council and our citizens have high expectations for quick results.
I will now deal with competitiveness. Improving the tax environment for businesses is central to EU competitiveness.
Investors need stability, legal certainty, a lower administrative burden and lower compliance costs. Eliminating unnecessary complexities and mismatches, which create tax obstacles for businesses in the Single Market, must be our focus. Already, we have made some progress. For example, cutting red tape and improving business cash flow is at the centre of our ongoing VAT reform. Certain important measures have already been delivered, such as new rules on electronic invoicing and cash accounting for small businesses. Other substantial improvements are in the pipeline and I am happy Ireland has made VAT one of its tax priorities for the Presidency. I would also like to see progress on the revision of the energy tax directive, which, if adopted, would avoid double taxation for businesses subject to the emissions trading system and encourage development of the green economy.
The common consolidated corporate tax base, CCCTB, is a crucial proposal for creating a business-friendly Single Market. Its fundamental objective is to make it cheaper and easier to do cross-border business in the European Union, be it by an SME seeking to expand or a multinational investor. The CCCTB has nothing to do with tax rates and Ireland has nothing to fear in this regard. Member states must remain free to set rates, and this flexibility allows a healthy degree of tax competition to be maintained. Bearing this in mind, I hope the Irish Presidency will help in pushing forward the CCCTB as a tool for greater EU competitiveness.
The European Union is currently working towards deepening the euro and forging a genuine economic and monetary union. Taxation cannot be avoided in this debate. Member states can, and must, retain their sovereignty on tax matters. This is essential for them to meet their specific national needs, but there must be recognition that the day of isolated tax policy is over. Coming closer together as a union on tax matters does not threaten member states' sovereignty; on the contrary, it reinforces their position at home to take the necessary measures for efficient growth-friendly and fair taxation. It helps our business and attracts investment by improving the Single Market and it strengthens our common position when addressing international challenges and spreading the principle of fair taxation abroad. I strongly believe, therefore, that for taxation, as for other policy areas, the answer to our current challenges lies in more Europe, not less. Let us move in that direction.
