Oireachtas Joint and Select Committees

Wednesday, 22 June 2022

Committee on Budgetary Oversight

Tax Expenditures Review: Discussion

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein) | Oireachtas source

I thank the witnesses for appearing before an coiste and for the three presentations. I will start with the research and development tax credit, the larger of the three being discussed. All members of the committee recognise the importance of developing innovation, high productivity and a high-wage economy, and the importance of research and development in that regard and in fostering research and innovation, particularly in indigenous companies.

It is clear from all the statistics we heard in the presentations and the statistics we have that there is an imbalance in the beneficiaries of the research and development tax credit, with the vast majority of expenditure under research and development going to foreign direct investment. The figures for 2020 show that 84% of the €3.1 billion in expenditure in respect of which the tax credit was claimed was by foreign-owned multinationals. Committee members will know that since 2018 and over the following years I have been calling for an increased rate of 30% to be made available to small and micro companies under the research and development tax credit. In fairness, the Minister took up this proposal in the Finance Act 2019, but it has not been implemented due to the communications his Department has received from the European Commission with regard to state aid.

Can the witnesses clarify the specific issues which resulted in this measure, the increase of the research and development tax credit rate from 25% to 30% for small and micro companies, not being progressed and being dropped? Can they expand on the different criteria that would have to apply to the two elements of the claim were it to be adopted? Can they outline whether state aid approval was given and what would need to be done to give it effect?

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