James Lawless (Kildare North, Fianna Fail) | Oireachtas source

As a Fianna Fáil spokesperson on science, technology and research, I am pleased to support the Bill and commend it to the House. I agree with the comments of my colleague, Deputy Collins, in terms of the Bill and its place in the wider context.

There is no doubt that the Bill is very necessary and welcome, and will make a significant difference to SMEs in terms of how they engage with research and innovation activities. It has many sensible sections, which the Minister of State and my colleague have already detailed. It is important to step back from the detail and consider the wider international context.

We are well aware that we are in an economic battle with other countries. The advent of President Trump in the United States, the march of Brexit in the UK and the wider context of the EU and efforts to introduce a common consolidated tax base and other such measures are all of concern.

We have always praised and taken pride in the many attributes we have. Our low corporation tax rate has been one such positive measure. Our English speaking vernacular, the dialects of our workforce and the fact we are in the eurozone are all very important measures in terms of international competition when we are looking for jobs and encouraging businesses to locate, centre and start up here. However, as is often the case, our greatest asset is our people. Our highly educated, motivated and creative workforce is the real secret to our success.

I recently had a conversation with Mr. Eamonn Sinnott from Intel, who is a remarkable man in his own right. We discussed the Ireland's Edge project, with which I am sure the Minister of State and my colleagues are familiar. High-tech employers and academics set out to try to capture what makes the Irish unique in terms of creativity and innovation. We have seen those attributes across the arts, the sciences and the business world. It is very difficult to quantify, but we can all agree that there is a unique and positive attribute of the Irish people, namely, that we are a creative people and make things happen. The core of this Bill is to reward that in every sense, including in a monetary sense. The talent, education and skills bases are what give us a competitive advantage, and mean that, despite international events, we can triumph.

I understand the knowledge development box is in the context of the OECD and base erosion and profit shifting, BEPS, initiative. I understand we are the first country in the world to follow through and introduce an OECD compliant tax measure of this sort. That is very welcome and something of which we should be proud. We are a world leader in that sense. I understand the Bill will replace the double Irish, which was phased out a couple of years ago. It makes a lot of sense to introduce such a measure, and it is critical in allowing innovation to succeed and be rewarded.

The research and development tax credit is a similar measure, which allows for a 25% return on innovative activities. However, following the extension of the knowledge development box to SMEs, perhaps we could learn from the operation of the research and development tax credit already in place. It is a fine measure and helps to stimulate research and innovation.

In a previous life, I worked on a project that qualified and saw this in action. However, I have spoken to SMEs that have told me very few of them have engaged on the R&D tax credit. Despite the welcome extension of the knowledge development box to SMEs, I would worry that the same pitfalls would face them.

One of the reasons the R&D tax credit is apparently not as useful to SMEs as it could or should be is the uncertainty about eligibility or the credit's application. If an SME, by definition a smaller company with limited resources, is to invest in an invention or innovative project with the view to later on claiming back an R&D tax credit or in this case a knowledge development box tax credit, it might find that it falls foul of Revenue because of a lack of Revenue guidelines. There is an uncertainty about what projects fit the bill and there is the possibility of a retrospective audit or a Revenue spot check three or more years later. Revenue can come back to the company and state that the innovative project that the company claimed an R&D tax credit for did not qualify and state why. There seems to be discrepancies and a lack of consistency in the application of the credit which is off-putting to companies that have limited resources and are trying to decide where to concentrate those resources. They are afraid that a couple of years down the line there may be a claw-back from Revenue on activity that they in good faith entered into with the intention of claiming the credit. Perhaps the Minister and those in the Department might examine that issue from the R&D tax credit point of view and with the knowledge development box in mind as well because some guidelines would be useful.

From speaking to colleagues in SMEs and bodies such as the Small Firms Association and ISME, I know that there was a successful initiative a couple of years ago which was called JobsPlus. SMEs were encouraged to take on a worker, that is, to take someone from the unemployment queue and into the workforce, for which they received a direct credit. I think a payment was made to help them pay the cost of hiring the worker. It was a direct job activation measure that took people into the workforce but there was a very real commodity in the sense that there was an actual financial and direct support provided to the company to take on the worker. For SMEs with limited resources, a tax credit down the road versus a cash payment right now is like a bird in the bush being worth two in the hand, as they say - or is the other way around? Whatever it is, having the income now is better than having it potentially as a credit in a year's time. Something like a JobsPlus for R&D would be welcome and would make sense as it would allow companies to directly intervene because they could with good knowledge and in confidence embark on a research policy. I suggest to the Minister and the House such an initiative for research in the way that there was JobsPlus in the past.

On a critical note that is relevant to today's debate, I am very disappointed about the programme for research in third level institutions, PRTLI. I raised this issue a number of times in the House over the past six months and again last week under the Order of Business. If we are to develop the knowledge economy and innovation and reward research, both at academic and business levels right down to the SME sector, which compares with some of the research institutions, we have to be serious about it and serious about funding it. From the figures I received on the PRTLI in the past couple of days, I understand it is now cut down to €14.4 million for the 2017 round. This is more than a 50% cut on the previous year which in itself was small fry compared to what it was in previous years. Since its introduction in 1998, the PRTLI has been a successful research fund that was targeted across many different academic institutions, projects and disciplines. It was broadly based and encompassed humanities as well as the STEM area. However, it appears to have been eroded constantly to the point that its funding is now €14.4 million, which is small money compared to other research projects.

I note that the Minister for Jobs Enterprise and innovation, Deputy Mary Mitchell O'Connor, from whose reply to the parliamentary question the figures emerged, referred to funding for Science Foundation Ireland, SFI, which is extremely welcome. It is a fantastic agency which does fantastic work and I praised it in this House only last week in the context of another debate, but there cannot be a one size fits all approach. Funding for SFI and other institutions is no excuse for robbing Peter to pay Paul and cutting back the PRTLI which has a broader appeal, is available to draw down by other institutions and universities and can be matched with, for instance, European research council funding. There were Supplementary Estimates in both 2015 and 2016 for the PRTLI and I appeal to the Minister and the Department to examine whether the €14.34 million could be bumped up. The programme is very deserving and the research institutions and universities will need it.

To put in context how it can be used, I visited a number of universities over the past number of months. They showed me, for instance, where a new building was commissioned, a new lab was designed or new measuring equipment was put in place using PRTLI funding. Five or ten years on, the equipment is being to fail. It is the equivalent of having a brand new school where in the classroom the children have no schoolbooks or outdated ones. The PRTLI funded the bread and butter machinery, buildings, equipment and resources. It is a much needed fund as opposed to other funds that may be more particular to research teams and high potential individuals. Those are also necessary but they are two different things and both need to be resourced equally because they are both extremely important.

We welcome the Bill and will support it. Its extension to SMEs is needed. SMEs are agile, versatile and up for a challenge. Many of them would love to invest in R&D and perform more innovative activities but, as I have outlined, there are practical obstacles to them doing so. I commend the Bill. As I stated, we will support it but I hope that some of the obstacles will be addressed during the passage of the Bill or through other measures. I rest my contribution there.

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