John Deasy (Waterford, Fine Gael) | Oireachtas source

What caught my attention reading this Bill was that it amounted to a legislative initiative to provide legal certainty to our research exemption for companies located here, presumably many of them from the United States. Exemption is the key word here. The second part of the Bill seeks to harmonise administration procedures for many of those same companies under the Singapore Treaty on the Law of Trademarks. In other words, legislation was devised to help many of these companies that do business here and facilitate as much as possible the processes involved in patents.

This is a research exemption and there has been much talk about exemptions in recent weeks. The two previous speakers mentioned them. I understand they might be on a different side of the spectrum politically from me, which is fair enough, but I have a different perspective on this. In that context, based on what was announced in the budget, and the two previous speakers mentioned the double Irish, it is important to refer to those measures announced in the budget which relate to that particular provision, which is being phased out but ended for new entrants into Ireland from January. For all intents and purposes it is a tax avoidance strategy - I think everyone knows that - by companies that use the device to lower their corporate tax liability.

In terms of the way it works, companies effectively move income from a higher tax country to a lower tax country using payments between related entities within their own corporate structures. I think everybody understands that. The fact is that Irish tax law has circumvented US transfer pricing rules and for that reason, it has made Ireland extremely attractive for large US multinational companies to locate here and at the same time create tens of thousands of jobs. It has injected large amounts of money into this economy at a time when it is badly needed. In terms of what happens now, no one is quite sure. There is huge uncertainty first, with the existing companies located here and how they will react and, second, the way prospective foreign direct investment will be affected and how those people who will be looking at Ireland might view Ireland now that the tax incentive has ended. The tax break will be closed to new entrants from January, and those companies currently enjoying the transfer pricing arrangement will see the arrangement end in 2020.

What struck me since this budget announcement are the extremes of opinion or predictions when it comes to analysing the consequences of ending this tax break. It depends on who one talks to as to how this will work itself out. When we get down to specifics, Google, for example, saved $2.5 billion last year by moving its operations here and using this tax break. That is the reason it is here. The Government has said it will soften the impact by granting additional tax breaks for patents, etc. This Bill is a good example of the Government facilitating companies further. Only time will tell how this will pan out and how adversely this will affect our economy but the truth is that it could be detrimental. There is no getting away from that.

The point I want to make is that at the same time as we are doing this, there are well-publicised plans to introduce compulsory collective bargaining. That would oblige all companies in the State to enter into negotiations with worker representatives. Currently, workers form a union but employers are not obliged to negotiate with them.

We should tread carefully from now on when it comes to prospective foreign direct investment, particularly as it pertains to those companies that come from the United States. As someone who has worked in corporate America and who has handled tax and trade issues on Capital Hill, I can tell the House that the practical reality is that US companies take into consideration mandatory labour laws and in some cases do not view favourably what they would regard as excessive requirements when it comes to unions and a mandatory requirement of negotiation. I realise this comes on foot of a ruling from the European Court of Human Rights and that provisions are proposed within the legislation to accommodate some large multinational firms, which currently deal with work councils and not unions.

The ESRI did some interesting research recently for the Department of Finance. It looked at the reasons multinational companies located here and the impact tax policy had on their decisions. The main finding was that fewer than half of the multinational companies here would have located here if our corporation tax rate was at the EU average of 22.5%. Even when that figure went down to 15%, about one-fifth of them said they would not have located here. That amounts to a lot of jobs.

The point is about what we are giving up as a result of this proposal. I have huge misgivings about doing that. It has translated into tens of thousands of well-paid jobs around the country at a time which can still be characterised as one of a relative crisis economically, and we have given it up. That is unbelievable.

We sometimes talk about piddling issues in this House. I am not casting aspersions on any individual or group but we walk out of this Chamber in protest over speaking time. The one aspect that has attracted companies that have created tens of thousands of jobs in this country in the past 20 years has been effectively ended with one statement, and we do not want to talk about it. No one has mentioned a word about it. That is unbelievable.

I have come to the conclusion that this collective bargaining measure has more to do with satisfying a political ideology within the Labour Party than with any common sense when it comes to the state of our economy. The idea seems to be to stick it on the résumé, create a junior Ministry for collective bargaining, and go to the electorate, and one's own constituency, with it before the next general election. What really annoys me is that Fine Gael agreed to this before making any decision when it came to the double Irish. That was a mistake. It was not rounded thinking when it comes to our economy as a whole and multinational companies, particularly those that come from the United States.

On the one hand, we are planning to end a huge incentive for US companies in particular to locate here without knowing how that will pan out. On the other hand, we are introducing what may seem reasonable and benign to some people but may actually act as a disincentive to companies looking to locate here. Countries throughout Europe, including the United Kingdom and the Netherlands, are reducing their corporation tax rate. They are introducing 0% patent boxes. They have been advertising that for years.

When some people in the Opposition and the Labour Party hear a Fine Gael Deputy question the wisdom of collective bargaining legislation they will immediately brand that Deputy as being anti-labour and anti-union but for once they might consider the merits of the argument I am making and the common sense around the two issues, namely, the ending of the double Irish, which I have misgivings about, and the introduction of requirements that will only act as a disincentive for some companies. The point I am making is that this might not be the wisest thing we have done when we consider everything in the whole and that, ultimately, jobs will not be created.

3 o’clock

The compulsory bargaining legislation should be put on hold until we know the effect the budget announcement on transfer pricing or the double Irish provision will have on our recovering, but still incredibly fragile, economy.

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