John Deasy (Waterford, Fine Gael) | Oireachtas source

I would like to talk about the knowledge development box and the issues surrounding foreign direct investment. It is fair to say we needed to do something once the Government agreed to abolish the double Irish tax relief, which is being phased out over five years. The partial solution arrived at is the knowledge development box, otherwise called a patent box. It is nothing new. Other countries have used and are using them. It amounts to a tax relief based on the amount of innovation and research a company undertakes. We already have an R&D credit which allows for a rebate on salaries. My understanding is the new relief will strictly adhere to the OECD guidelines. This is important, because it can only apply to intellectual property developed in Ireland domestically and will allow a company to lessen its tax bill on its profits. Therefore, it is fairly narrow and, on the face of it, does not seem to match even remotely the potential downside of ending the incentive of the double Irish tax relief, however one feels about that tax relief.

The fact companies will not be able to claim relief for research and innovation outside the jurisdiction but within their own company makes the impact of this fairly limited. It will, of course, be of interest to some companies, but we have to ask ourselves whether it will have mass appeal to multinationals. The answer is "No", one of the reasons being that many other countries, particularly in Europe, are doing exactly the same thing. For example, the Dutch patent box has an effective rate of 4% to 5% whereas the rate in the Finance Bill is some 6.5%.

Why are we doing this if it has a limited impact? I believe the answer has to do with the controversy that surrounds companies like Apple and Google paying little or no tax, which has not gone away yet. It probably seemed wise to make some changes to try to avoid repercussions down the line before the idea of a consolidated European tax base rears its head again. This leaves us in a situation where in four years' time, when we arrive at a level playing field, we may be as attractive, or unattractive, as every other European country in this regard.

This brings me to the matter of Paddy Cosgrave and the web summit. I listened to Mr. Cosgrave on "Morning Ireland" on Tuesday and since then, I have heard him described as being petulant and lecturing. My first impression was that senior civil servants would not be used to being spoken to as they were and certainly would not like being questioned in that manner and I am around long enough to be aware of that. However, when we analyse what Mr. Cosgrave sought, it was not so mad at all. In fact, his WiFi and traffic management requests seem downright reasonable. He may have been a bit in the face of civil servants used to dealing with people in the old style of "Begging your pardon, Sir" but we should remember what this man has done. He co-founded an event that has grown from 400 people to 40,000 in four years and he probably did not achieve this by being pushover.

This country is not yet in a position where we can afford to lose this kind of business. Why were other countries allowed the opportunity to poach this summit? It is clear we did not take the organisers of the web summit seriously when they threatened to pull out. Ten years ago, we were the ones poaching business from other countries. We had the edge and grabbed the multinationals and landed them, in the face of intense competition from around the world. As a country, we still act as if we are significantly larger and richer than we are. I guess that if the web summit scenario occurred in the United States, it would have been dealt with swiftly, face to face and there would have been no need for the million e-mails between Mr. Cosgrave and the Department of the Taoiseach. Looking in from the outside, I think what was needed in this situation was common sense, a bit of pragmatism and a desire to solve the problem.

This brings me to the issue of problem solving in the context of industrial development. This fits in with my view that we must adapt to attract foreign investment. Take for example the situation in which I have found myself in my home town of Dungarvan. For the past six months or so, we have been attempting to get the IDA to take over an empty factory in Dungarvan. This project was initiated when the IDA was testifying at the Committee of Public Accounts. We put a proposal to the IDA to have the building included in its property portfolio in order to market it abroad. This proposal has progressed but some horse trading needs to be done, amounting to a cost of approximately €200,000. We have a tender to refit ready to go and the submission has been made to the IDA but we need somebody to make a decision. We are beginning to feel a little like Paddy Cosgrave - a million e-mails but no action. The organisation involved in this idea is a good one and is headed by somebody who is highly regarded. I called him about this issue and he called me back but we have not yet met. Issues like this take too long to resolve. I need somebody in a senior position in the IDA to sit down and make a deal with my county manager and somebody to come up with an arrangement, to be done with it and to move on. Too many e-mails are sent but too few decisions are made.

The budget announced a regional building programme for the foreign direct investment alluded to in this Bill. That is great but in the case of the project in Dungarvan, we already have the building. If we had to cost an equivalent new build, it would amount to approximately €1.5 million. Where are we going in regard to this? The Government needs to take an interdepartmental look at how attractive or unattractive we may be in a few years, based on changes in our tax code and pressure from the European Commission and the OECD. It must also take a look at decision-making and at how it interfaces with local authorities and those involved in private industry in this country.

The development of the knowledge development box is useful but limited. We will need to come up with a lot more if we are to make up for the ending of the double Irish tax relief.

See this speech in context