Michael Noonan (Limerick City, Fine Gael)
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It is a full review of all aspects of the research and development regime. This particular proposal is a modest measure with no costs to the Exchequer. Its purpose is to remove a barrier which prevented small businesses from accessing the key employee relief. Given that there is no additional cost to the Exchequer it does not make sense to wait a further year until data is available when we can help companies now. Then everything is subject to review.

There are many safeguards. The new 50% criteria still requires that an employee spend the majority of his or her time performing research and development in order to be eligible. In addition, the overall regime contains a number of other safeguards to prevent misuse. First, the key employee cannot be a director or have a material interest in the company as this would potentially allow manipulation of the regime. Second, before an employee can claim the benefit of the relief the employer must have paid all payroll taxes in respect of the employee's wages. Third, an employee who claims the credit must file a tax return for the year of claims. Fourth, when a company surrenders credit to a key employee it must record the fact and make a corporation tax return. Fifth, the employee's tax rate cannot be deducted below 23% and the relief does not apply to the universal social charge or PRSI. That effectively means that the employee will have a minimum effective rate of 30% in line with the high earners restriction. Members will understand the policy arguments, and they have been recited before, that inventive people are a scarce commodity in any society. People who can create a new product and patent it are a scarce commodity but they are also very mobile. The provision is particularly tailored so that key inventive people in research and development companies can be rewarded because of their benefit to the State in due course.

My Department is conducting a review but I do not want to hold up the provision for 12 months when it is at no cost to the Exchequer. I do not agree with a delay simply because of a review. I ask the members to accept the provision then my Department will conduct a review. It will be an all embracing review.