Paschal Donohoe (Dublin Central, Fine Gael)

I thank all the Deputies for their points. I will deal with each of them in turn.

First, with regard to cost, the estimated first-year cost of the Finance Bill 2025 enhancement to the research and development tax credit is €169.9 million. The estimated Exchequer cost of the enhancement is €305.9 million. The difference in the first-year cost and the full-year cost is due to the manner in which a company claims the research and development tax credit in three instalments over three years. In year one, the first instalment of a claim is equal to 50% of the total claim other than for smaller claims in the scope of the first-year payment threshold. In year two, the second instalment is equal to 30%. In year three, the final instalment is 20%. Therefore, the full-year cost does not crystalise in year one, as claimant companies do not receive the full value of their tax credit until the third instalment in year three. For the third year, it would be expected that the first, second and third instalment amounts which are payable would all be in respect of the research and development tax credit claims at the 35% rate and, therefore, the projected full-year cost would be the relevant estimate.

In terms of take-up and the point that the three Deputies have made regarding small and medium-sized companies and their ability to access this, we have over three different Finance Bills made a number of changes to the operation of this credit and I will talk in a moment about the impact that we are now seeing regarding the drawdown of the credit.

The measures in previous finance legislation removed certain caps on payable credit and the process of first offsetting the credit against corporation tax liabilities and provided instead a fixed three-year payment schedule. They also provided that the first €25,000 claim would be payable in full in the first year instead of being spread over three annual payments. The policy rationale behind that was to try to provide a cash-flow benefit for smaller research and development projects to encourage more companies to engage with the research and development corporation tax credit regime. Those changes were made. They will benefit anyone to whom they apply and applies to the scheme. The change with regard to the €25,000 claim was made in the hope that it would be of help to companies of a certain scale.

What is interesting is that the figures we have available for the most recent year, 2023, and the breakdown of the number and size of the different companies which are availing of the tax credit show that the value of the credit small and medium-sized companies are drawing down has increased. The total value of the tax credit companies with fewer than ten employees, namely microcompanies, are obtaining is €46 million. That is an increase of 24% on where we were in 2020. The value of the credits companies with between 11 and 49 employees are obtaining now stands at €95 million, which is a 69% increase on where we were in 2020. The value of the credits companies with between 50 and 249 employees have obtained has gone up by 51%. Thus, there are some signs that the various changes we made have been successful in encouraging more smaller companies to claim this credit and increase the value of the research and development they are involved in, which, in turn, allows them to gain a higher share of the research and development tax credit, as I have just outlined.

I have not yet received the review, but I believe I will in a few weeks' time. The reason is that my officials who are involved in this area and their colleagues are also involved in work relating to the OECD and the ongoing international tax negotiations. I have asked that that work be prioritised, and it has received their focus. My aim is to be in a position, in a few short months, to publish the review of the research and development tax credit in conjunction with the compass document, which will outline the kinds of issues we will consider regarding the implementation of the research and development tax credit in the years ahead.

Deputy Cian O'Callaghan referred to other ways in which we can support research and innovation in the economy a moment ago. This is the reason the Minister, Deputy Lawless, is taking legislation through the Oireachtas to allow the surplus in the National Training Fund, NTF, to be accessed and spent. My anticipation is that this surplus will be spent in a way that is supportive of research and development in universities. I take the Deputy's point that research and development cannot only happen in the private sector. We have to look at how we can support it in the public sector too, and the change in the NTF aims to make a difference to that.

I acknowledge the point Deputy O'Farrell touched on. I apologise, Deputy Farrell. I am called "O'Donoghue" all the time-----