As the Deputy will be aware, Members of the European Council met by video conference on 26th March to discuss the COVID-19 crisis. In their statement of the 26th March, leaders acknowledged that the pandemic constitutes an unprecedented challenge for Europe and the whole world and that it required urgent, decisive, and comprehensive action at the EU, national, regional and local levels. Leaders mandated the European Commission to bring forward proposals for a comprehensive recovery plan including plans for investment across the EU. The European Commission is expected to publish their proposals on 27th May.
On the 13th May, the President of the European Commission, President von der Leyen, made an address to the European Parliament in which she outlined that the Commission’s proposed recovery package would consist of two parts; firstly, the EU Budget/the Multiannual Financial Framework (MFF) and secondly, on top of the MFF, a recovery instrument to be funded through a larger headroom within the EU Budget. We await the European Commission’s proposals.
In the meantime, a number of Member States have published their views on what should be included in the Recovery Plan, how and where the expenditure should be targeted, whether support should be provided through loans and/or grants, whether conditions should be applied to Member States availing of the funding and how the recovery fund should be financed.
On 18th May, Chancellor Merkel and President Macron presented joint French and German proposals for European Recovery. The centrepiece of their proposals is a €500 billion recovery fund for additional EU spending through the EU Budget, jointly borrowed on the markets, to provide financial support for the most affected sectors and regions on the basis of EU budget programmes and in line with European priorities.
The proposals made by France and Germany are an important contribution and a step in the right direction on Europe’s recovery efforts. They are proposals from two Member States - we are assessing the detail of these proposals along with input from other Member States. Agreement on a way forward will require the approval of all 27 Member States.
The Recovery Fund must focus on the most pressing economic needs to reboot the economy once the health crisis has receded. It should be temporary and targeted, prioritising sectors and regions that have been most impacted but also those that can generate and enable sustainable economic growth in the new normal of the post-Covid economy. In particular, it should be deployed to accelerate both the digital and green transitions in the EU. Equally, a recovery fund and other funding must create a future for business models that are viable.
Ireland will continue to engage positively in the MFF and recovery plan discussions and work with Member States and the institutions to build consensus for early agreement. There are issues and matters, including those raised in the French and German proposals, that need careful consideration to assess the implications for Ireland. It will not be until then that we will fully know the specifics of the extent to which and how Member States can avail of funding for the MFF and the Recovery Fund.
The European Commission's proposals on the Post 2020 MFF and Recovery Fund will be the subject of detailed negotiations. When we have sight of their proposals, we will have a clearer understanding of the impacts of them for Ireland.
With regard to the tax proposals linked to the French and German proposed recovery fund, the Deputy will have noted that France, Germany and the European Commission have all expressed their support for the OECD process as the best forum in which to address issues arising in the field of international taxation.
Nevertheless, Commissioner Gentolini recently re-affirmed his intention to propose a new EU levy on digital services and a minimum corporate tax rate in 2021, if global negotiations fall short. While the Franco-German Initiative for European Recovery from the Coronavirus Crisis echoes this ambition, such moves will require the agreement of all Member States. The economic context has changed dramatically in recent months and all countries are now considering what impact the current crisis may have on their overall tax systems, which may influence their views on international tax issues.
Much progress has been made in the current discussions at OECD, and technical work at the OECD is continuing. The intention is to find political agreement for work on addressing tax and digitalisation by the end of 2020 and we remain focused on that goal.
