Willie Penrose (Longford-Westmeath, Labour)

I thank Fine Gael for tabling this motion on the corporation tax regime. It is extremely important to send out a clear and unified signal from the House on the fundamental importance of the corporation tax rate to the country and the economy. It is important that industry finds this a very hospitable and attractive area in which to locate. I was glad to see the retention and non-disturbance of the 12.5% tax rate embedded in the midst of all the documentation furnished on the four year plan.

The maintenance of this rate is of fundamental importance to the country in the context of our overall industrial policy as it has been developed since the 1950s, in particular in the context of inward investment, especially foreign direct investment. It serves as a key magnet. It must be stated that it is not the most important factor but it is one of a number of important factors in terms of focusing on our attractiveness when overseas corporations make decisions on, and evaluate whether, to locate here. Various IDA executives and others from Enterprise Ireland and Forfás always advocate it as a key aspect of Government support for industry and research and development. It is extremely important in the context of an attractive and continually enhanced tax system, particularly the fact that the corporation tax rate of 12.5% applies to all corporate trading profits. This puts us at an advantage against some countries, although countries such as Sweden and Singapore are becoming extremely competitive in this area. Therefore, it is important that we maintain this advantage.

To facilitate international business, Ireland has signed double taxation agreements with more than 60 countries, including a recent agreement with Singapore, which allows the elimination or mitigation of double taxation. Because of our attractive tax rate and well-established regulatory and legal regime, combined with our open and accommodating business environment, Ireland's status as a world-class location for international business is well-established. Approximately 130,000 jobs are IDA backed and more than 200,000 jobs can find their origins in foreign multinational companies. The implementation of this corporation tax regime came into being under the rainbow Government when my colleague, Deputy Ruairí Quinn, was Minister for Finance and John Bruton was Taoiseach. They successfully concluded negotiations on the rate with their European counterparts and subsequently it was introduced by Charlie McCreevy in 1999.

One issue that arises is the fact that many multinationals have established regional or global headquarters here for the purpose of managing their profits and shareholdings and other functions associated with their international business. They derive significant tax advantage from this but people wonder whether many jobs are created in this fashion. It is no use having a generous taxation rate, which we all advocate, without a jobs element attached thereto, and this is extremely important.

During the course of both Lisbon treaty debates, I was assured of our competence as a sovereign state and that issues of taxation rates and incentives were clearly matters for the Irish Government. Therefore, any attempts, which have been mostly of a verbal nature, to indicate that as part of the conditionality attached to the recent discussions at EU and IMF level Ireland might have to address its low corporation tax are ineffectual and ineffective and should be treated as such. Whatever the size of the other member states making such observations, they have no legal right to do so. It is an important issue in the context of our competitiveness and we must send a clear, unified and undiluted message to outsiders to keep their nose out of our business, particularly when various European treaties have asserted our independence and sovereignty in this area.

Combined with our education system are our continued investment in research and development, innovation, entrepreneurship and our science and technology focus. Yesterday, Professor Frank Gannon, the director general of Science Foundation Ireland came before the Oireachtas Joint Committee on Enterprise, Trade and Innovation. Science Foundation Ireland funds fundamental world-class research in strategic areas and the output from this research is likely to have a significant ongoing economic impact. In particular, funding is made available for research for Ireland's future and for research with consequences. SFI works closely with the IDA, Enterprise Ireland and Forfás to build new sources of competitive advantage for our companies. This is important as there are a number of aspects to competitiveness. The taxation rate is one such aspect but continual investment in research and development, entrepreneurship, innovation and science and technology must also be facilitated and promoted.

As Professor Gannon stated, innovation is a term that is increasingly used to describe the generation of novelty in the sphere of activities of individuals and companies. However, a characteristic of innovation is that it is not truly predictable. Therefore, one can get surprise outcomes and Professor Gannon pointed to this on a number of occasions yesterday. The committee also had a presentation from the Tyndall National Institute, UCC, which was equally informative and illuminating in this context. It plays an extremely important and worthwhile role in the following areas: the development of human capital; attracting and working with IDA clients; conducting research and development partnerships with industry; generating licences to industry; leveraging EU funds; creating start-up companies; providing assistance to business; and academic excellence. The delegation before the committee went through all of this in great detail. The institute also indicated that the identification, protection and management of intellectual property is the key to the development of innovative companies and that Enterprise Ireland funding for patent protection is very important. The delegation implored that this funding be reinstated as it is an important aspect of our competitiveness and attractiveness in ensuring that companies locate here.

More than 80% of our exports originate from the multinational sector, and the Labour Party freely acknowledges the importance of foreign direct investment and its continued investment in this country. As the Minister stated last night, it is a vote of confidence in this nation and our people. The BRIC countries, namely, Brazil, Russia, India and China, represent new areas of potential opportunities for us to explore. The IDA has opened offices in these areas in recent times and they have also spoken to Enterprise Ireland. However, there is a significant dearth in numbers and there should be a significant redeployment of personnel to these areas, particularly in the context of the Croke Park agreement. Enterprise Ireland and the IDA should focus on these areas and put more people into the BRIC economy areas. There is tremendous potential there and we have the personnel and the educated people to do so. Not enough people are being deployed in these markets.

The recent report of the Commission on Taxation recognised the importance of a low and stable corporation tax rate, as did the OECD, as being the cornerstone of Irish tax policy. It is fundamental in the context of attracting investment and investors. Any signals to transfer or tamper with our corporation tax rate are unsettling and damaging in the short and medium term. Therefore, we wish to join our colleagues in reaffirming in unambiguous fashion the Labour Party's commitment to the retention of the 12.5% rate. There should be no attempt to erode in any way our Irish tax competitiveness or our corporate strategy. We see it in the number of jobs generated by IDA supported companies, which is more than 130,000. The importance of retaining the 12.5% tax rate is fundamental in the context of recovery, which undoubtedly will come.

I was glad to hear the German Chancellor, Angela Merkel, indicate quite clearly that she does not wish to meddle with our corporation tax rate of 12.5% and that it will not be related in any way to the ongoing discussions. Our indigenous industries are also important, particularly the agricultural and food processing areas, and we see the success of Glanbia, Kerrygold and the great work of Bord Bia under its chief executive, Aidan Cotter. There is still tremendous untapped potential. We are an island country with approximately 150,000 people directly employed in primary agriculture and agri-food processing, with an estimated total of 250,000 people employed in agriculture. Agri-food processing and related services account for approximately one in five people employed outside of Dublin and there is a projected export growth rate of approximately 12% in this sector with another €750 million this year. We should not forget the importance of the indigenous sector, micro industries and enterprise, along with foreign direct investment, in the context of the corporation tax.

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