Pearse Doherty (Donegal, Sinn Fein)

This is obviously a substantial change to our offering here, and follows on from last year's Finance Bill where the research and development tax credit was increased to 30% from 25%. This sees an increase to 35%. Could the Minister outline the costs associated with this measure? That would be the first thing.

The second issue here is that, as the Minister knows, this credit mainly goes to larger companies. Many of them are within the scope of pillar 2. If the Minister has the detail on that – I think he provided it to the finance committee before – that would be helpful. I have serious concerns about bringing in such a measure in the absence of the review of R&D.

I understand the Department has done the review and has not published it. There has not been a review on the research and development tax credit for a number of years. The Minister is asking Members of this Oireachtas to increase the tax break to 35% without any benefit of the review that followed the consultation. First and foremost, that is bad practice. There is a suggestion that the review may be published before the Finance Bill is enacted but it should be published now so that we can inform discussion, debate and dialogue as to whether this is an appropriate move in the context of what is happening globally, which there could be a strong argument for.

I would like to have seen that review. I would like to have seen the concentration. I would like to have seen measures that would encourage the uptake by small and medium-sized enterprises of this tax credit. Approximately one fifth of it goes to small and medium-sized enterprises. Such enterprises make up by far the largest number of enterprises that exist in the State but only a fraction of the tax credit goes in that regard. Of the 1,600 or so claimants, I understand a significant amount of the value of this credit goes to companies with significant turnover in the State. That is not to say that we should not be supporting research and development in those companies. The question is whether in a period of 24 months we should go from 25% to 35% in relation to the credit.

I would also like to see whether the review has looked at other ways that the research and development tax credit can be structured. There are research and development tax systems in other jurisdictions that target SMEs with more favourable provisions. I have argued that for probably the last decade with the Minister in relation to that issue because encouraging research and development is the engine to enterprise and the levels of uptake by SMEs are far too low. The Singapore scheme allows companies to claim a deduction of up to 400% on the first $400,000 of qualifying research and development expenditure. Australia offers SMEs a rate of 43%. The Netherlands is offering 40%. Germany has introduced an SME credit at 35%. There are different jurisdictions taking an approach to say that they need to see SMEs doing more and, therefore, they will provide an enhanced system to SMEs.

What we have here is a blanket increase of 35% so it benefits everybody who avails of this. In 2023, there were over 1,800 companies availing of it. The price tag for this is €1.4 billion. It is by far the largest corporation tax relief in Ireland, and for good reason, but it has increased substantially over the last couple of years. In 2023, it was €1.4 billion. Two years before that, it was half that. I do not know what it will be in 2025, obviously, because we have increased the rate, which I supported, and what it could be in 2027 and 2028 when we see returns when the rate goes up further. These increases were happening without rates increases and as I said, SMEs are only claiming 20% of the cost, with 80% going to larger firms.

I am reluctant to support this measure in the absence of the review that has been conducted and I do not understand why that has not been published. Maybe the Minister could answer. Has he seen the review? Is it completed? Is it on the Minister's desk? What is the delay in publishing it?