On the eve of the Budget, issues of taxation are on top of the national political agenda. How the Minister for Finance, Mr McCreevy, chooses to tax and spend will concern every citizen of the State in coming days. But he makes decisions in a wider context of Ireland's membership of the European Union and the disciplines imposed by our participation in the single market and the single currency.
Ireland's distinctive low corporate taxation regime is once again coming up for scrutiny by other EU states which consider it unfairly distorts competition. A Franco-German paper to the Convention on the Future of Europe will propose moves to harmonise corporation tax and value added tax to improve the single market.
Proposals to decide on taxation by qualified majority voting were strenuously and successfully resisted by the Government in the Nice Treaty negotiations two years ago. Ireland's low corporation tax of 12.5 per cent is rightly regarded as a crucial ingredient of this State's economic development. It is now clear that another battle looms on the subject in the next EU treaty negotiations.
Yesterday the Minister for Justice, Equality and Law Reform, Mr Michael McDowell, argued strongly against tax harmonisation in a speech to the Academy of European law in Trier.
Coming one day after the forthcoming Franco-German proposal on the subject was publicised, it was a timely intervention on a highly topical subject. The French and Germans are developing a powerful agenda for consideration by the Convention, covering security and defence, justice and home affairs and how the EU should be run when it enlarges. They are now represented at the Convention by their foreign ministers. Its brief is to prepare the ground for the next Inter-Governmental Conference (IGC), to agree another treaty in 2004.
These French and German initiatives make it clear that real politics covering vitally important issues for Ireland and other EU member-states are being conducted through the Convention. While the IGC is where the final bargaining will be done, it would be foolhardy to assume its agenda will not be set and partly determined by the Convention process currently under way. And yet the Government's dismissive attitude towards the Convention, reflected in its minimalist political involvement, seems to be based on just such an assumption.
This is an ill-advised approach, contradicted by these political developments. They underline the need to devote more political attention to the Convention by formulating objectives and cultivating diplomatic allies. Its pace and scope are driven by the urgent need to agree on how best to run the EU after it enlarges from 15 to 26 states in the next year and a half. Ireland's problem with Nice gives us no excuse to avoid that reality or delay coming to terms with it.