Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

Go raibh maith agat. My amendment is different, but it captures some of what Deputy Boyd Barrett said. It focuses specifically on the research and development, R&D, tax credit. I believe there is a value to the R&D tax credit. I am not arguing for it to be abolished but I am concerned about the way it is set. I am concerned about the fact that it is out of control and that the cost of this tax credit is increasing dramatically. We need to do something about it. It needs to be reformed. We see that the cost of the tax credit in 2010 was €224 million, yet five years later it went up to €708 million. That is a huge increase in a tax credit.

We also see that the number of companies availing of the tax credit has actually decreased, particularly in the 2013-15 period, when the tax credit increased by €300 million. We know from the data provided by the Revenue and from the independent analysis that ten companies are currently claiming two thirds of the credit. Some €460 million of it is going to ten companies. We also know that €283 million of it is dead weight, that is, research and development worth €283 million would have been carried out anyway. In any type of tax credit there will be a portion of dead weight but 40% is on the high end.

I know the Government is not there to please me but I do not think it is a good practice to release a lot of these reports on budget day. A case in point was the help-to-buy report. I do not think there was anything in that report that could have affected the market, and it could have been released a week before. This review of the tax credits is another example because there is so much information surrounding it. It is good that there is so much information in the budget documents but when reports like that are published online on that day they sometimes do not get the attention they deserve. The evaluation was not a full evaluation or a cost-benefit analysis, and that is something that should be done on the R&D tax credit. It did recognise that the relief is reasonably successful but it notes that this must be immediately qualified by referring to the notable dead weight associated with this unrestricted fiscal incentive and it goes on to refer to the 40% dead weight.

One of the key things that jumped out at me is that when this report was done, the cost of the tax credit for 2015 was not known. At the end of the conclusions it suggests, as another approach, lowering the tax reduction to firms that need a break. The report notes that the value of outstanding credits in 2014 was €592 million and given the size of this future liability to the Exchequer, it recommends considering how to prevent it from increasing even further in the future. The authors go on to suggest a number of ways in which that can be done. In 2014, the figure was €553 million, yet within a year it jumped to €708 million. God knows where it was in 2016, and indeed 2017, but on this basis we could be looking at a billion-euro tax credit very soon. The problem here is that two thirds of it is going to the top ten companies, so it does not reach small and medium enterprises. Indeed, the report refers to the fact that younger companies are not benefitting from this and it refers to a wait-and-see approach. That is not good for younger companies.

We have a scheme that is not working and is costing a lot of money. The number of companies that it are availing of it shrinking, yet the cost of it is increasing and there is significant dead weight.

While 40% of dead weight might be acceptable in a lower-cost scheme, when the dead weight is at over €250 million, we have to ask about the structure of the tax credit. My amendment therefore calls for a report within six months setting out the specific actions to be taken to reform the research and development tax credit, reduce the cost of the credit, stop abuses relating to inflated claims and make the credit more appropriate for SMEs. I refer to abuses because there appears to be a mismatch in the CSO data and the data provided by companies. That could be the result of an inflation of research and development for the purposes of gaining the tax credit. That is something that would need to be teased out. I am not asking the Minister to amend this now as I do not really know how to do that. There is a report already which has provided a number of suggestions. We need to signal the fact that there will be changes to the research and development tax credit, in relation to which the Minister needs to carry out a proper and full cost-benefit analysis as suggested. It is time to look at implementing some of the recommendations suggested.