Michael McGrath (Cork South Central, Fianna Fail)
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What is the expectation for the additional research and development activity this will generate over time? The Minister of State has put a cost on the introduction of the knowledge development box of €50 million in a full year, which presumably means that some of the profits currently taxed at 12.5% will be taxed at 6.25% when the knowledge development box is implemented. For me, the real value of having a knowledge development box is that is generates additional investment, additional research and development related activity and, ultimately, additional employment and corporation tax revenue. That must be the objective and the ultimate measure of whether this will work. There should not be a cost to the State by way of tax forgone in net terms in the introduction of a knowledge development box. The purpose is not just to change the basis on which certain profits are taxed from one rate to another, as that would not achieve the overall purpose.

What the Minister of State said about the European Union was interesting. It does not require separate approval from the European Union because it meets the OECD standard. However, that does not mean that the European Union will not at some stage initiate a probe, as it is entitled to do and as it did in the case of the United Kingdom's patent box some time ago. Will the Minister of State clarify where this places Ireland in terms of its attractiveness as a location for research and development related activity? Our rate of 6.25% is lower than the 10% rate in the United Kingdom. Are there other countries in Europe that offer similar rates? Where do we rank in the European Union, in particular?

On what Deputy Richard Boyd Barrett said, the key issue in terms of profit shifting, undoubtedly, relates to transfer pricing, royalty payments and moving profits from one jurisdiction to another. As long as there are so-called Crown dependencies and overseas territories of the United Kingdom such as Bermuda, the Cayman Islands and the Virgin Islands which charge no corporation tax, companies will do what they can to channel profits to these destinations. The way to deal with that issue is through international co-operation. What we can control here directly are the allowable deductions against trading profits, capital allowances, research and development allowable expenditure, losses forward and so forth. However, we must nail the issue of transfer pricing because profits are being moved from one jurisdiction to another through the transfer pricing mechanism. Ultimately, however, I always make the point that this is about real jobs. Last week Apple announced an additional 1,000 jobs in Cork. When they come on stream, there will be 6,000 people in Cork city working for Apple, which is truly extraordinary. Ireland cannot be compared with the brass plate operations in Bermuda and the Cayman Islands which are book companies facilitating the transfer of billions of euro to destinations where there is no corporation tax charged. That is what it is about. Until that matter is dealt with collaboratively with other countries on an international basis, we can only get our house in order.

I welcome the introduction of the knowledge development box, but it is right to probe and ask serious questions about it because it should enhance value and revenue. Ultimately, that will be the measure of it.