Taoiseach’s comments open up new front in corporation tax war

Well, school is very much back after the summer. And that means the Irish Times Inside Politics digest is back with a bang; bright eyed and bushy tailed. Or, at the very least, back. Someone who isn't coming back, bang or otherwise, is Katherine Zappone, who "respectfully" declined an invitation to give evidence at the Oireachtas foreign affairs committee about the summertime saga which bore her name.

The controversy kept many hacks in bread over quiet summer months, such is the gratitude of the journalistic community that many have travelled (economy class, naturally) all the way to New York to visit her apartment building, just so they can say thanks in person. They might even find the time to cover the Taoiseach's visit to the United Nations, as she doesn't seem to be in.

Thankfully, Taoiseach Micheál Martin has picked up the news mantle – and in some style. There has been speculation that the 12.5 per cent corporation tax rate may be in danger – squeezed by international tax reforms and pressure from Brussels – for some time. However, his failure to give it full throated backing is a significant departure from what has been an article of faith for the policymaking elites of the State for almost 20 years.

The actual words Martin spoke, a typically hedged Taoiseach's answer refusing to commit either way on a policy matter under discussion, are misleadingly banal but the importance of them cannot be understated. For political generations the response to any question on the 12.5 per cent tax rate has been to fully and completely back it as the cornerstone of Irish industrial policy. The rate, where it stood and what it stood for, has been a lightning rod of criticism for the State almost since its introduction as a special rate for IFSC or manufacturing income (ironically, first as 10 per cent, gradually equalised to 12.5 per cent on trading income for all companies).

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While successive Governments stood over it, controversy accumulated around it and an exotic constellation of tax "innovations", which solidified the perception of Ireland as prime territory for tax chicanery. The Taoiseach's statements – which must be calculated – open up a new front in a long-running war, and will prompt new questions about the Irish industrial model and how it will be designed in the decades to come. Even for a Government which has mounted unprecedented interventions during Covid, a meaningful departure here could rank as its most long-lasting legacy.

It is also a moment of political delicacy: how Fine Gael, and Minister for Finance Paschal Donohoe in particular, proceed from here is key and will be fascinating to watch. So far, Donohoe has held back from committing Ireland to multinational reforms on a minimum rate, but his Taoiseach's words may signal a shift, which Donohoe more than any other Coalition figure will be responsible for implementing tactfully. If Martin has indicated the "what" part of a new strategy, the "how" and the "when" will be trickier, inevitably for Donohoe. Expect this to come up in Dublin and New York today – the Minister for Finance is on his feet in the Dáil at 8pm.

Cormac McQuinn's report from New York is here.

Covid may be receding into the background, but its legacy, the impact on the State finances and the labour market, remain of prime concern over Ireland's competitiveness. More on that in our lead story here.

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Playbook

The Government has vowed to put the unpleasantness of the summer behind it, after much intra-Coalition and internal party backbiting and recriminations over the Zappone/Merriongate affair. Last week's no confidence motion showed there is no shortage of venom to fuel the new political season, with highly charged exchanges on the floor of the Dáil (reconvened in Leinster House).

The parliamentary and political action resumes this week off campus, with Tánaiste Leo Varadkar chairing a Cabinet meeting at 9am in Dublin Castle. There's a slimmed down agenda due to the Taoiseach's absence. More details on what will be discussed here.

There's a clatter of committee meetings, including the Public Accounts Committee at 11am, which is largely housekeeping, before officials from the Department of the Environment are at the Environment and Climate Action committee, which is scrutinising EU legislation at 12.30pm. At the same time, the subcommittee on mental health will meet the Health Service Executive on the proposed closure of the Owenacurra Centre in Midleton.

The afternoon sees the justice committee hearing from a range of groups on the Garda digital recording Bill, while the agriculture committee will hear about the impact of peat shortages and the Common Agricultural Policy, they're both at 3.30pm. The education committee will hear from Minister for Education Norma Foley and Minister of State for Special Education and Inclusion Josepha Madigan on the reopening of schools, among other matters, at 4.30pm.

The Dáil kicks off with Leaders' Questions from Sinn Féin, Labour, People Before Profit-Solidarity and the Rural Independent Group at 2pm. There are several motions without debate before Government business focuses on the exchange of DNA profiles and vehicle registration data with the UK, new legislation governing corporate enforcement, the introduiton of "penalty points" for fishermen and legislation on the functioning of the Garda.

Paschal Donohoe will take oral questions at 8pm, following a Sinn Féin Private Members’ Bill seeking to delete the sunset clause affording an exemption to developers who secure planning before 2026 to provide 20 per cent of relevant land for social and affordable housing.

The Seanad sits at 2pm, and hears motions regarding bullying and sexual harassment at third-level institutions at 5pm, and the UK DNA and vehicle registration exchange issue at 7.15pm.

Over in New York, the Taoiseach will attend the UN General Assembly at 2pm US time (7pm Irish time), but will not be speaking. The itinerary suggests a 10.45pm media opportunity, which would be in the wee small hours in Ireland.