Jimmy Deenihan (Kerry North, Fine Gael)

I wish to refer to various comments made by the Minister for Finance yesterday on "Prime Time" and also by other Government speakers with regard to Fine Gael's attitude to the public service. Fine Gael takes great pride in the public service. It set it up. Cumann na nGaedheal, when in power, set up the public service appointments commission that ensured continuity with the previous Administration. It ensured the best people were appointed and that we had the best civil and public servants in the world. Public servants serve this country very well.

My party set up the Local Appointments Commission. We have a very proud history in this respect. All we want is to see reform so we can save money, thus ensuring an efficient public service that will be an engine of growth and that waste will be eliminated. We start with ourselves. Our leader has proposed to abolish the Seanad. There is a rumour circulating that a referendum on this will be held by Fianna Fáil at the same time as the general election. Our leader has proposed to reduce the number of Members in the Dáil to 130.

The national recovery plan confirms that the patent royalty exemption will be scrapped. This has major implications at a time where we are trying to create an enterprising economy. The exemption is one of the drivers of such an economy. I realise this because one company in Kerry has used it very effectively. It has been a significant driver of innovation and growth within many Irish companies and for foreign inventors resident in Ireland. The exemption scheme was very workable and drove both innovation and sales.

If a company developed a product and gained patent royalties as a result of the sale of that product, it meant the investors could receive a share of the royalties tax free. The abolition was signalled in the four year plan and the scheme has been abolished since 24 November.

A report on the research and development tax credit scheme, commissioned by the Department of Finance in 2007 and produced by Goodbody Economic Consultants, clearly states:

The Irish R&D tax credit scheme is less generous than that of some of Ireland's European competitors. In this context, the Patent Royalty Tax Exemption scheme must be regarded as substantial component of Irish tax-based support for R&D and one which helps raise the level of R&D tax-based supports in Ireland to that available from such supports across the EU.

The provision allowed for a payment of a dividend tax-free to the inventor subject to a maximum limit. The maximum limit was curtailed significantly in recent years. In addition to the exemption being important to indigenous companies, it was a significant reason some inventors chose to reside and pay tax in Ireland. It is for this reason that many research and development companies decided to come to Ireland.

Malta recently set up a structure similar to ours and introduced similar provisions. Other countries considered doing so also. For a saving of €20 million in 2011 and €15 million in a full year, we are now scrapping one of the major incentives for inventors to establish in Ireland. We talk about creativity and entrepreneurship, yet we kill one aspect of them in one fell swoop. This is ridiculous and the matter should be revisited. The incentive helped a company in County Kerry to do very well.

There will be major trouble over the adjustment to the section 23 relief. The decision in this regard will be contested in the courts because people who entered agreements under the section in good faith - I do not refer to the developers but to investors - will be badly stung. They budgeted for a period of ten years. The relief is being discontinued and this will mean many of the investors will go bankrupt. The decision will be contested in court. I am convinced the Minister will be hearing more about this. I am signalling this matter to the official present from the Department of Finance because it has major implications.

See this speech in context