Niall Collins (Limerick County, Fianna Fail) | Oireachtas source

Fianna Fáil supports the Knowledge Development Box (Certification of Inventions) Bill 2016 and looks forward to strengthening its provisions on Committee Stage. The Bill will enable SMEs, which employ around 920,000 people nationwide, to avail of the knowledge development box, KDB, taxation scheme on profits relating to research and development activities, with a reduced corporation tax rate of 6.25%.

The Bill also extends the KDB definition of intellectual property beyond patents and copyrighted software to what has been referred as the IP equivalent to a patentable invention. This will permit Irish SMEs to include inventions that are certified as novel, non-obvious and useful. However, it has been pointed out that the certification will be decided by the Patents Office, the same entity which decides on patents. While the this measure was announced in October 2014, successive Fine Gael-led Governments must be criticised for taking over two years to come forward with primary legislation to enable SMEs access this tax scheme.

The freezing of this Bill is appalling considering that there are provisions in it to reduce the regulatory and compliance burden on micro and medium-sized enterprises. Given how exposed Irish exporters are to a hard Brexit, this is yet another example of the slow response by the Government before and after the UK referendum in taking every measure at its disposal to safeguard Irish SME business and employment. In this regard, I would call on the Minister for Jobs, Enterprise and Innovation, Deputy Mary Mitchell O'Connor, to immediately complete Report Stage of the Companies (Accounting) Bill 2016 and accept amendments put forward by Fianna Fáil that will secure high value Irish jobs as a Brexit contingency measure. However, the UK’s competitive edge for enterprise and attracting new businesses and jobs has seen Ireland slip further and further behind our near neighbour. Despite the Government's attempt to claim that Irish competitiveness levels are improving, the latest statistics say otherwise.

Ireland has continued to plunge on the Word Bank’s ratings for the ease of doing business across 190 economies, dropping to eighteenth in its 2017 report. The Taoiseach has failed to meet his 2016 target of making Ireland the best small country in the world in which to do business. Ireland has fallen behind Georgia, Latvia, Estonia and Macedonia in global rankings. Budget 2017 did not close the competitiveness deficit with the UK.

The UK will still has a more attractive capital gains tax relief which applies a 10% rate to entrepreneurial gains of up to £10 million, far in excess of the €1 million Irish limit. The current regime still puts Ireland at a competitive disadvantage as a location to conduct business in. The chief executive of the Irish Exporters Association has said that the reduced capital gains tax rate does not bring us onto the racetrack given that the UK had a ceiling that was ten times the scale of Ireland’s £1 million threshold. Dublin Chamber of Commerce said that the changes will do little to stem the flow of start-up companies moving to the UK from Ireland.

Irish start-ups are also attracted to the UK enterprise investment scheme which makes early-stage capital much more readily available in the UK. In Ireland, the employment and investment incentive scheme provides individual investors with tax relief of 30% in respect of investments of up to €150,000 per annum. However in the UK, the enterprise investment, which is similar to the enterprise investment scheme in Ireland, enables investors to receive tax relief of 30% on investments of up to £1 million.

The UK is planning to reduce its corporation tax rate to 17%, which would bring it closer to Ireland’s 12.5% rate. The Government needs to use every available tool to make the current regulatory landscape a more attractive location to retain and attract new businesses and entrepreneurs to establish in Ireland. I find it extraordinary that the Minister has refused to review her Department's ten year strategic enterprise policy, Enterprise 2025, following the Brexit vote.

Fianna Fáil has called for the immediate review of all the employment and export targets in Enterprise 2025 following publication of two recent ESRI Brexit impact reports. There is no allowance in the Enterprise 2025 forecasts, published over 12 months ago, for the impact of Brexit on Ireland in regard to employment levels and export targets based on the various UK trading scenarios that might emerge in a hard Brexit scenario.

The ESRI report, Modelling the Medium to Long Term Potential Macroeconomic Impact of Brexit on Ireland, indicated a hard Brexit with Britain operating under WTO trading rules would result in Irish unemployment increasing by 2%. Another ESRI report, The Product and Sector Level Impact of a Hard Brexit across the EU, laid out a chilling picture for Irish exporters and related jobs. In a WTO tariff scenario post-Brexit, Irish exports to the UK would be the most exposed in the EU, leading to a reduction of 4% of total exports. Shockingly, Ireland would face a severe tariff exposure. While we make up 5% of the UK’s total imports, we would be charged nearly 20% of the total EU tariff.

The Government needs to play a proactive role with business scenario planning, so that Irish companies impacted by Brexit can take informed strategic and commercial decisions to plan for this situation. The Minister needs to review her Enterprise 2025 strategic document. We are happy to support the Bill on Second Stage and will seek to amend it, where necessary, on Committee Stage.

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