A post by Henry Farrell at Crooked Timber prompted me to look at the issue being banded about by the No camp in the Irish referendum campaign that ratifying the Treaty would mean Ireland’s low corporation taxation regime could be challenged. The legal technicalities of this are explained by Ralf Grahn, but what about the politics?

Essentially there are 2 issues here: concerns often expressed in Germany and other Member States that different corporation taxation levels are a problem as companies locate to low tax rate countries like Ireland, and the Treaty of Lisbon that changes very little in this regard. Taxation matters still require unanimity should the Treaty be ratified.

Look a bit further at the corporation tax issue and it’s actually not the corporation tax rates that Commissioner Laszlo Kovacs is looking into, but a common list of what corporate profits are to be taxed – to allow administration to be simplified and even, possibly, to make it easier to compare corporation taxation rates between countries. Plus Kovacs well knows that a lot of Member States oppose even this, hence there’s been talk of the EU using enhanced cooperation measures to go ahead with this – even under the current treaties. More from Ralf Grahn on this, and the small changes to enhanced cooperation under the Lisbon Treaty – less Member States needed, so less pressure would be applied to Ireland.

Look at the issue more generally and even with states there is tax competiton – for business taxes in the USA (move to Delaware or Nevada) and on car taxes in France (register in 60 or 76 for preferential financial arrangements). Surely there’s no problem with such things between Member States in the EU?

In short: is ratification of the Treaty going to mean there’s pressure on Ireland to change its corporation tax rate? No. Will there be pressure on Ireland on this issue in the future, whether the Treaty is ratified or not? Yes.

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