Taoiseach Leo Varadkar has sought to defend Ireland’s controversial corporation tax system, saying EU member states should be retain the ability to set their own tax rates.

In an address to the European Parliament in Strasbourg, Mr Varadkar said that “whatever the future holds, Europe needs to be competitive economically. One of the ways to ensure this is by having competition among member states”.

“This is particularly important for peripheral and less developed countries whose domestic markets are small and need inward investment,” he said.

“My strong view is that national taxes that fund national budgets should be determined by national parliaments and governments.”

Ireland’s 12.5 per cent corporation tax rate has been consistently targeted by other European leaders and Mr Varadkar said it was his view that corporations “should pay their fair share of tax”.

“We cannot tolerate a situation where large companies can avoid paying any taxes anywhere,” he said.

“That’s as true for American tech companies as it is for European car manufacturers, or for international aerospace and defence companies.

“Ireland has already taken steps to close loopholes in our tax laws. And we will do more. We strongly believe this should be done on an international basis through the OECD. Europe should not give advantages to our competitors by acting unilaterally.”

‘Decisive point’

On the future of the EU, the subject of the Taoiseach’s address to MEPs, Mr Varadkar said the union was at a “decisive point in its history” and despite “the rise of populism and euroscepticism, nationalism and anti-democractic forces”. He noted that the parliament was meeting in solidarity.

“The European ideal has always been inspired by a spirit of optimism and a belief in a better future. While that ideal has been tested, it has not been broken. And based on the achievements of the past, we have a renewed appetite to face the challenges of the future.”

He noted the work of Northern Ireland politician John Hume and his vision for a lasting peace based on people working together, with shared purpose and endeavour.

“Today, a peace bridge crossing the River Foyle brings together the divided communities in John’s native city of Derry, in Northern Ireland, a bridge that the European Union helped to build.”

Mr Varadkar said it was hard to imagine the Belfast Agreement being made without shared membership of the European Union and the single market.

“In Ireland we are now having to contemplate our future without the foundation that underpinned it,” he said. “That is why the Irish Government has been so determined to protect the Good Friday Agreement, in all its parts, and in all that flows from it.

“It is why we have insisted that there can be no return to a hard Border on our island, no new barriers to the movement of people or to trade. And it is why we are so deeply grateful for the remarkable solidarity and support we have received from Member States.”

The Taoiseach said the EU had “consistently recognised the unique position of Northern Ireland, and the unique situation in which it has been put by the decision of the UK to leave the EU.

“The majority of people in Northern Ireland voted to remain in the EU; the majority of its representatives elected to the Northern Ireland assembly want to remain in the Customs Union and the Single Market; and it is likely that the majority of people living in Northern Ireland will remain European citizens after Brexit, because of their unique status as dual Irish/British citizens under the Good Friday Agreement.

“The breakthrough achieved before Christmas means that the United Kingdom has guaranteed that, whatever its future relationship with the European Union, a hard Border on the island of Ireland will be avoided. The Common Travel Area and its associated rights will be maintained.

‘No backsliding’

“As the negotiations move forward, we will continue to rely on your support and solidarity as we work to ensure that what has been promised in theory is delivered in practice. There can be no backsliding.

“So, it is important that these commitments in the legal text of the Withdrawal Agreement, and firmly embedded in the UK’s future relationship with the EU, whatever shape that ultimately takes.”

He said he hoped the future relationship with the UK would be “as close and deep as possible”.

Mr Varadkar said countries in the western Balkans should be given a pathway to EU membership as the prospect of it “can be a powerful motivator for those seeking to build peace, freedom, prosperity and democracy”.

He said he was pleased that Ireland had signed up to the EU defence initiative Pesco, which saw member states coming together to deal with threats in an inclusive way.

“The threats we face in the 21st century include cyber terrorism, cyber attacks, international terrorism, uncontrolled mass migration, natural disasters, and drug and human trafficking. We want to be involved in European actions against all of these,” he said.