Simon Harris (Wicklow, Fine Gael) | Oireachtas source

The payment dates for preliminary tax, such that it will be €31 million next year but it would be €50 million in a full year. How we are arriving at the figure in terms of the expected cost is an important question. The annual cost of the knowledge development box in terms of tax foregone from 2016 forward have been estimated. This focused on companies who up until this year had corporate profits that were taxable in Ireland at the standard 12.5% corporation tax rate and who from 2016 may have profits that are taxable at the KDB rate of 6.25%. On the basis of the analysis carried out in the 2013 review of the research and development, R&D, tax credit the majority of Irish firms who undertake R&D in Ireland are claiming the R&D tax credit so it is assumed that companies who would be able to qualify for the knowledge development box rate are captured by this data, which is reported by the Revenue Commissioners in the corporation tax, CT, returns.

On the basis of the most recent data available, the Revenue Commissioners has advised that in 2013, the total CT liability of all such firms was €1.4 billion. This is the outer limit of tax that could be reduced by the KDB rate. In reality, the number of companies who will be able to immediately avail of the KDB will be much lower as only the proportion of income that is attributable to qualifying assets such as patents or copyright qualify. Unfortunately, no data in that regard is collected by the Revenue Commissioners. The amount of income that could qualify for the KDB rate is the proportion of expenditure on qualifying R&D in Ireland over the total amount of worldwide R&D that was carried out to generate the intellectual property, IP, assets. That is how we have arrived at the cost.

I was struck by the point made by Deputy Tóibín's colleague, Deputy Pearse Doherty, during the debate on last year's Finance Bill and in other discussions, which I think is a fair point, that sometimes in a finance Bill it is worth taking a chance on trying an idea that could result in more R&D, more innovation and substance based R&D. With this knowledge development box we now have the first OECD compliant box in the world. While other countries and other competitor jurisdictions will have to adapt, amend and improve their offering to ensure they comply, Ireland will not because - this refers back to the kicking and screaming comments made earlier - rather than rushing to do things the Minister used the period between the last budget, in which he made the announcement about the knowledge development box, and this budget to ensure we have in place a box that is reputationally sound and in accordance with the new OECD figures.