Amendment No. 2 is out of order as it is of the nature of a substantive amendment of the statute law.
SECTION 7.
The question ceased to apply in 1986; it cannot cease to apply if it no longer applies. This is a technical amendment. Why would this constitute a significant change?
Under the normal rules you are not allowed to challenge my ruling but I have an explanation which may clarify the position. The amendment seeks to ensure that a specified provision of the Age of Majority Act, 1985, shall be repealed. The Bill, on the other hand, provides that the said provision shall cease to apply. To propose that the provision be repealed is of greater consequence than specifying that it shall cease to apply. This amendment proposes a substantive amendment of the statute law and must be judged out of order accordingly.
Amendment No. 2 not moved.
Section 7 agreed to.
SECTIONS 8-28.
It is proposed to take sections 8 to 28, inclusive, together. Is that agreed? Agreed.
Question proposed: "That sections 8 to 28, inclusive, stand part of the Bill."
Sections 21 to 28 deal with corporation profits tax. Is the consolidation in respect of manufacturing and financial services being made at the 10 per cent rate?
Yes.
Despite my best efforts last week I failed to get the Minister to reply to an Adjournment debate on proposed changes to the 10 per cent rate and his discussions in Brussels. Will he indicate the present position?
The public may be confused about these connected issues. It is within the remit of each member state to set its own tax rate. Commissioner Monti and his tax group are looking at a taxation package. There are a number of elements to such a package, one of which would be a code of conduct between member states which would deal with tax competition. The Commissioner has been pushing this and it is hoped it will be agreed during the Luxembourg Presidency by the end of the year. Ireland has no objection to a voluntary code of conduct but the matter has yet to be finalised.
On the other hand, Commissioner Van Miert and others are concerned about the differential between what is the standard tax and corporation tax rate in Ireland now, presently at 36 per cent, and the special 10 per cent rate which applies to IFSC companies, Shannon companies and manufacturing companies. It is up to each member state to define its own standard. We got a specific remit from the Commission to have the special rate to the year 2005 for companies in the IFSC and Shannon area. The 10 per cent manufacturing rate will last to the year 2010 for existing companies. There has been comment about the Irish rates, particularly the difference between the preferential rate and our standard rate which was 50 per cent for a long time, 40 per cent until quite recently and has now dropped to 36 per cent and will drop further to the new general standard rate. The last Government put a proposal to the Commission that the new general standard rate would be 12.5 per cent and that we would move to that for IFSC, manufacturing and Shannon area companies.
That is proposal which has been put to the EU. There has been no discussion as to the rights of a country to set its own general standard rate. If one wanted to have the standard rate as low as 2 per cent one could. There might be objections in the monetary committee as to whether that would be regarded as harmful tax competition. However, under the Treaty provisions a country can set its own tax rate. The problem arises in having two rates. At the moment we are in discussion with Brussels how best to proceed from the 36 per cent standard rate to our new standard rate. The outgoing Government proposed a rate of 12.5 per cent for companies which until now had enjoyed a 10 per cent rate and a 25 per cent rate for passive income, so to speak. That is the subject of the debate.
I have been dealing with the matter since 26 June and I have had a number of ECOFIN meetings at which the monetary code of conduct has been discussed. I also met recently with Commissioner Van Miert who has responsibility for state aids. The question is not about rates of 10 per cent or 12.5 per cent because it is within the remit of each member state to do as it wishes in that regard. The question is how we will progress from our current standard rate to the new standard rate.
That is the nub of the issue. In the process of going from the present position to a new standard rate the proposal of the previous Government was for a new standard rate of 12.5 per cent. I wish to establish if that is still the Government's proposal or if it has put an alternative proposal of 10 per cent.
The Government's position is the same as that put forward by the last Government; what was proposed by it in April is still the current Irish position. We were debating how to go from A to B. The question of what the new standard rate will be has not been raised by Brussels or anyone else. I have indicated this to the Dáil in reply to a parliamentary question. The Irish negotiating position is as put forward by the last Government. There has been no change.