Section 141 provides a tax exemption, subject to certain restrictions, for distributions made to Irish resident persons from companies' exempt patent income. The relief is being abolished on foot of a recommendation to this effect in the report of the Commission on Taxation, which recommendation the Government has accepted. As part of its terms of reference, the commission was asked to review all the expenditure to determine if the continued operation of the exemptions was justified on cost benefit grounds. The commission concluded that the relief has not resulted to any great extent in companies carrying out research and development activity and that the relief was being used in some cases by companies as a tax avoidance device to remunerate employees. It considered that there was a significant dead weight element to the relief and that it provided a windfall gain after a successful invention rather than an incentive to encourage new research and development. The Government agrees with the conclusions of the commission that available resources should be focused instead on the research and development tax credit scheme. That scheme provides a more direct and effective incentive for enterprises to innovate and invest in research and development activities and the scheme has been enhanced significantly by the Government in recent years for this purpose.

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