Brian Lenihan Jnr (Dublin West, Fianna Fail)

It has been very well explained in this House. I spoke at length on this in committee and, while outlining some of the difficulties, I said it was an issue I would like to examine further. I am not prepared to accept the amendment this year because of the difficulties associated with introducing such a fundamental change into the tax code, and it is not entirely clear where the amendment would fit into our existing arrangements.

I made a number of arguments in this regard on Committee Stage and I do not want to rehearse them all. The fundamental argument is that while we provide incentives for R&D activities undertaken, we do not incentivise any resulting spin-off commercial activity. A decision to do that at this stage would have far-reaching effects. The new scheme of capital allowances for the acquisition or provision of intangible assets was introduced in the 2009 Act, as Deputies are aware. When a company acquires intellectual property for development and commercialisation, it can claim capital allowances and the scheme, in conjunction with the current corporation tax rate and the research and development credit, encourages investment in research and development and the commercial exploitation of intellectual property. Where there is this added incentive for commercialisation, especially where the company which undertook the research and development is not itself equipped to commercialise the research and development - this is what arises here - the proposed amendment is a very significant change and has knock-on implications for capital gains tax. It could be argued that an incentive of this nature would encourage companies to dispose of intellectual property, IP, arising from their research and development activities and make a once-off windfall gain rather than take the commercial risk of exploiting the benefit of the intellectual property. If the IP is disposed of, there is no guarantee it will be commercialised and result in economic benefits and employment in the economy. Where the tax system encourages the acquisition of IP, as is the purpose behind the current scheme, it is more likely that the company availing of the incentive will be geared towards exploiting the commercial potential of the patent.

I reiterated much of this information on Committee Stage but it may be some comfort to Deputy Bruton's proposal. As I said on Committee Stage, the proposal is worthy of more thought and I will ask my Department to consider it further in the context of the range of incentives available to encourage and support innovation and the knowledge economy.

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