Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

Capital allowances for intangible assets were introduced in the Finance Act 2009 to support the development of the knowledge economy and the provision of high quality employment. When the capital allowances were introduced a restriction was provided to cap at 80% the amount of income the allowances could be used against in any year.

The cap was removed for a period between 2015 and 2017 to bring the tax treatment of intangible assets into line with the tax treatment of similar assets in other jurisdictions and to enhance the competitiveness of Ireland as a location for companies to develop intellectual property. This was in recognition of the fact that investment in growth in OECD economies is increasingly being driven by investment in intangible assets. However, following a significant increase in the use of capital allowances in 2015, the 80% cap was restored in the Finance Act 2017. For the purposes of certainty, changes to tax law are generally made on a prospective basis, such that they apply only from the date on which they have had legal effect. It should be noted that the operation of the cap is a timing matter. The measure has no effect on the overall quantum of capital allowances for intangible assets available to use against the relative trading income. Any amounts restricted in one accounting period as a result of the cap are available for carry-forward and use in a subsequent accounting period, subject to the application of the cap in that period.

I am advised by Revenue that, in the short term, there could be a large theoretical cashflow gain, tentatively estimated to be in the region of €722 million, from the introduction of an 80% cap on intangible assets on-shored between 2015 and 2017. However, it is important to clarify that such a change would not lead to more tax overall and this is simply a timing matter. To present this as additional ongoing tax for the Exchequer would not be correct. Having regard to the depth of discussion on record with regard to this issue, I do not believe a further report is needed. For this reason, I am not in a position to accept the Deputy's proposed amendment.

More broadly, the Deputy, in his opening contribution, made the point that this is not a minor matter and he is correct. In terms of the debate that I believe will ensue in the work that is taking place in the OECD and the Irish response to that work, which I have outlined elsewhere - I look forward to having a debate in this committee regarding the direction in which I think we should go - the issue of the treatment of the digital economy and how intangible assets are taxed both globally and in Ireland will be areas of increasing debate and focus. While I do not believe that a further report is merited given how much debate has already taken place on the matter, if there are particular areas in which the Deputy has information needs and would like me to do further work on, I will be happy to do so. I am also happy to supply the information directly to him.