Irish May Face EU Tax Pressure in Return for Brexit Support

(Bloomberg) -- Some European Union members may press Ireland to drop its opposition to wide-ranging corporate tax reform in return for the bloc’s backing on Brexit, a person familiar with the matter said.

While no explicit link has yet been made between Ireland’s resistance to a digital tax and the EU’s efforts to avoid a hard border after Brexit, solidarity doesn’t come for free, according to the European official, who asked not to be identified because they aren’t authorized to speak publicly on the matter.

The official’s comments are the first sign that at least some nations expect a price to be extracted for the bloc’s commitments to Ireland in the Brexit process.

EU leaders have frequently pressed Ireland over reforms. In June, as European Commission President Jean Claude Juncker reassured Irish lawmakers of the bloc’s determination to avoid the return of a hard border in Ireland after Brexit, he also urged them to drop opposition to the digital tax.

Given the EU’s unwavering support around Brexit, it will be politically unsustainable for Ireland to be the sole blocker of tax changes, the person said. Any tax proposal will need the unanimous approval of all EU members before becoming law, meaning a single country could block it.

Malta Support

Still, Ireland is far from alone in its concerns around the digital tax and efforts to link it to Brexit may flounder. Earlier this month, Malta’s finance chief poured cold water on European efforts to strike a deal on taxing digital companies by the end of the year, saying such a levy should be agreed at a global level.

“This is not just Ireland or Luxembourg or Malta,” Finance Minister Edward Scicluna said in an interview with Bloomberg. “Half of the council, especially the northern countries, understand that it’s foolish to go for a quick fix tax in a complicated area like that.”

Responding to a request for comment, a spokeswoman for Irish Finance Minister Paschal Donohoe pointed to an interview he gave to Politico earlier this month. He said Ireland accepts there needs to be a change to the way the digital economy is taxed, but it can’t be confined to the bloc.

“There are a number of other member states that have concerns in relation to development of policy in this area if it’s done just in Europe,” he said. “We have said that we need to take great care in bringing in further policies that run the risk of undermining progress that could be made globally in relation to this.”

To contact the reporter on this story: Dara Doyle in Dublin at ddoyle1@bloomberg.net

To contact the editors responsible for this story: Vidya Root at vroot@bloomberg.net, Thomas Penny, Stuart Biggs

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