Mr. Fergal O'Brien:

I will be happy to respond to some of Senator Barrett's comments. I will start with the observation regarding research and development and will connect it to the other issue of tax reliefs. Something that we have learned from the crisis is the importance of much more rigorous evaluation of all these expenditures. The Senator is probably aware that the Department of Finance is undertaking a detailed evaluation of that research and development tax credit at present. We got to the game far too late in respect of evaluating the property tax reliefs and had some of those recommendations be taken on earlier, we probably could have pre-empted some of the worst of the crisis. In respect of research and development, we are competing for mobile projects and we need to distinguish between domestic property reliefs and such mobile investment, and the aforementioned research and development activity is incredibly mobile. Within the multinational groups with which we deal, one has sites within the same company in Galway, Manchester, Utrecht and the United States, all of which are bidding for a mobile research and development investment project. We perceive the ability to use that credit to be a difference between Ireland winning or losing that mobile project and it does make a difference. We have undertaken extremely detailed research ourselves and made a 50-page submission to the Department of Finance based on survey feedback from approximately 300 companies. We were able to track what they were doing in research and development in 2003, 2007 and 2012. We were able to establish how many people were employed in research and development and what their investment was in research and development. Consequently, the scheme is working and I believe it stacks up from a cost-benefit perspective. We have looked at our own detailed evaluation and the Government will do its own.

As for the Senator's specific issue regarding the key employee element, the reason this was changed at the last time around was to reflect the realities of business, which are that we do not have many companies in which employees are 100% engaged in research and development. One tends to find, for example, that process engineers are out on the floor working with machines, as well as carrying out research and development. This is the reality for most manufacturing companies and the 75% limit was restricting such people from genuine research and development activity. As for the key employee component of the scheme mentioned by the Senator, very few companies are actually using it. As it is not working, we are not losing anything in terms of tax revenue. It is a shame that well-intentioned elements of our schemes are not being taken up and are not working. This was also evident in the employment supports area, in which there was a lack of awareness and information. When things are not working, we must change them and it was reflecting the realities of business that people were not full-time research and development staff.

They were doing other engineering, development and maintenance as well.