Ms Deirdre Donaghy:

In terms of the claimants, we have very limited information because my colleagues in Revenue will tell me they cannot give it to me either. When the numbers come down so low, they are prevented from going into details that would identify. The numbers are low but not unexpectedly low on the knowledge development box because it is quite a restricted relief.

In terms of the future changes, R&D and the knowledge development box are both potentially being affected, particularly by pillar 2, which is the minimum effective tax rate. The changes to GILTI are obviously tied in with that as well. Under pillar 2, a country has to calculate a minimum effective rate of 15% based on the global anti-base erosion, or GloBE, base. The question is that if someone has a tax credit, is that something that reduces their effective rate or is it not? All of the countries involved recognise the value of R&D and recognise it is something they want to be supported. Provided it meets the definition of what they called a qualifying refundable tax credit, it is not treated as reducing someone’s effective tax rate. The idea is that if someone has something that is not a qualified credit, the credit is treated as basically reducing the tax they have paid, which reduces their effective rate, which makes it more likely they have to pay a top-up, whereas if they have a qualifying tax credit, it is treated instead as income. It effectively comes in almost above the line, in a way. Instead of saying that someone has €100 in income and they paid €12 in tax and got €5 in tax credit, it means they only paid €7 in tax. That would be the non-qualifying version. The qualifying version would be that they had their €100 in income, they paid their €12 in tax and, with the €5 offset of the tax credit, the way it is treated is that they still paid €12 in tax but they had €105 in income. Therefore, it increases their income and, effectively, they will have to pay the 15% on that, but it preserves the majority of the value of it.

There is a definition in those rules of what a qualifying refundable tax credit is. Our R&D tax credit is very close to that. It is possible there may need to be some small changes to it but that is something we are looking at this year in the context of the review.

For the knowledge development box, it is a different element of pillar 2 that might affect that. Outside of the GloBE rules, there is a separate element called the subject to tax rule. This is where a jurisdiction has any element of its tax system that provides an effective tax rate of less than 9%. Because the knowledge development box effectively allows a tax rate of 6.25%, because what it does is halve the income and it then taxes that-----