A no deal Brexit would result in a period of 'chaos' and Ireland would have to negotiate with the EU and the UK to avoid a hard border, Taoiseach Leo Varadkar has said.

Mr Varadkar said Ireland would face a 'major dilemma' if there is a no deal scenario.

"Ireland has obligations to protect the single market...the United Kingdom would have a responsibility to abide by World Trade Organisation rules, and both the United Kingdom and Ireland would have responsibilities to honour the Good Friday Agreement and the peace process.

"So I think we'd end up in a situation whereby the EU and Ireland and the UK would have to come together and in order to honour our commitment to the people of Ireland that there would be no hard border, we would have to agree on full alignment on customs and regulations.

"So after a period of chaos we would perhaps end up exactly where we are now, with a very similar deal."

Mr Varadkar said however that this was a hypothetical answer to a hypothetical question.

"The truth is nobody can know for sure what would happen in a no-deal scenario, that's why we worked so hard over the past two years to put together a withdrawal agreement."

Mr Varadkar also said in an interview with Euronews that he was concerned about dissident Republican violence in the context of Brexit.

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He said it was 'very lucky' that nobody died in a recent car bomb in Derry, believed to have been carried out by dissidents.

"I don't want to say that that was directly linked to Brexit, or that it was directly linked to the 100th anniversary of the Irish parliament being founded. But Brexit is now all part of the context.

"It's one of the reasons why the power-sharing Government isn't functioning in Northern Ireland, and it is something that's causing great concern for citizens in the North and also along the border counties."

"Every day thousands of people cross the border to go to work, thousands of people cross the border to go to college or school. And all of those people are very worried now about what the future holds.

"Things that they thought had been settled have now been unsettled, and that does create an environment that dissidents can exploit."

Mr Varadkar dismissed the idea of a bilateral UK-Ireland deal that would avoid a hard border.

"We're always happy to discuss matters with our British colleagues… But it should be well understood by now that when it comes to negotiations that they're conducted between the EU and the UK.

"When it comes to issues like trade in particular, those are a European competence, so any agreement relating to trade or market regulations has to be done at an EU level. And Ireland is stronger, we're in a much stronger position being part of a team of 27."

The Taoiseach's comments come after UK Chancellor Philip Hammond has pulled out of a panel discussion on Europe he was participating in, alongside a number of other European leaders.

Mr Hammond would likely have faced difficult questions on the state of Brexit.

Taoiseach Leo Varadkar defended the Irish tax system in the face of a thinly veiled swipe from Polish PM Mateusz Morawiecki in Davos this morning at the debate.

Sitting beside Taoiseach Mr Varadkar for a panel discussion on Europe, Mr Morawiecki said he was a strong supporter of the digital tax plan to which Ireland was opposed.

"There are tax havens in Europe which abuse their taxation systems to the detriment of other countries. And we should stop this because this is not helping the European Union to build trust towards each other.

"I would be in favour of eliminating all tax havens from Europe because this would bring a level playing field."

Later in the discussion Mr Varadkar said Ireland was "forever closing tax loopholes" like the Double Irish, saying this had been a factor in the boom in corporation tax receipts. "We're going to continue to do that".

"I think big companies should pay their taxes, should pay the taxes they owe, should pay them in full and should pay them where they are owed."

He said Ireland was opposed to the digital tax because it taxed revenues rather than profits.

"The principles have to be that the tax is where value is created - not where there is turnover."

Speaking as the panel concluded, Mr Morawiecki said there needed to be a 'level playing field' on tax to take account of Poland's history with communism.

"For 50 years we couldn't develop... now in terms of taxation, in terms of many other critical systems for the social and economic environment, we need to take this into account to have a real level playing field."

"It was an interesting intervention by Leo about where the taxes should be paid, turnover versus where the value is created.. we have to find out a common denominator on all of those."

Mr Varadkar in his opening remarks to the panel said Europe's influence is diminishing in the world, and that no member state is in the top 20 most populous countries.

"If we've any chance of preserving our values and our way of life, and the way we believe things should happen, we need to stick together."

"We're all small countries," he said, saying that no nation state could deal with issues like climate change or managing migration.

Mr Varadkar said he wanted to see Europe become "a international group of nations that is politically influential".

"America has decided to move away from its former role in world leadership, regrettably, at least for now.

"China is becoming ever stronger which isn't necessarily a bad thing. But I think that Europe needs to really be able to have a common foreign policy in particular, and act in the world, and to be a force for good in the world."

Meanwhile, Dutch prime minister Mark Rutte said a hard border on the island of Ireland would potentially lead to the return of the Troubles.

He said that if there was any expiry of the backstop agreement, that would lead to a hard border - indicating the challenge Ireland would face if trying to negotiate to avoid a border in a no-deal scenario.

"And what does a hard border mean? The end of the Good Friday Agreement, back to potentially the Troubles we have seen in Ireland. Nobody wants that," Mr Rutte said.

UK chancellor Philip Hammond was supposed to be on the panel but pulled out.

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