Maurice Quinlivan (Limerick City, Sinn Fein) | Oireachtas source

I do not think I will need that much time but we will see what we can do. I welcome the broad thrust of the Bill but Sinn Féin has a few issues that it will raise on Committee Stage although we will raise most of them before then. As the Minister of State is aware, the Bill is technical in nature. Its primary aim is to amend sections of the Patents Act 1992 to allow for the introduction of a substantive examination of patent applications and facilitate the issuing of long-term patents, with a certification scheme for the knowledge development box which will allow small companies to qualify. Once certified, SMEs involved in research activities will be able to avail of a reduced corporation tax rate of 6.25%. As explained in the Bill, an SME is a company with no more than 250 employees, intellectual property assets of less than €7.5 million and global turnover of less than €50 million. We have to measure this description against that of very small community businesses that are crippled by rates, rents and various taxes, practically none of which they can avoid or on none of which they get deals.

My party believes it is well past time for an honest debate on corporation tax. Just this week the European Commission again attacked the reckless tax-cutting agenda of the Government and its use of volatile corporation tax receipts to underpin spending. In the past my party’s finance spokesperson, Deputy Pearse Doherty, dared to mention the name of a particular company, Apple, but he was shouted down by Fine Gael Deputies, including the Minister of State at the Department of Foreign Affairs and Trade, Deputy Dara Murphy. This is the level of maturity that this and previous Governments have shown when it comes to a discussion about corporation tax. That this remains the position, even in the face of recent EU ruling against Apple, is simply not good enough.

Sinn Féin supports having an open, transparent and competitive all-Ireland corporation tax rate which does not allow large multinationals off the hook in respect of their tax responsibilities. It is said that the knowledge development box is the first such scheme in the world to comply with the terms of the OECD project on base erosion and profit shifting, BEPS, to minimise corporations' efforts to minimise their tax liabilities. It is also said it is to encourage investment specifically in research and development activities by reducing the tax companies pay on earnings. My party is all for indigenous Irish companies that can grow and employ significant numbers. One hopes these companies will be much more loyal to the country than those which up and leave overnight once economic conditions deteriorate, as we have seen happen on too many occasions. We need to focus on supporting small SMEs that will have a loyalty to their communities, their staff and their country. That said, the measures in today’s Bill needs to be seen for what they are - a further tax avoidance measure that the ordinary Joe Public simply cannot avail of. Companies with a turnover of up to €50 million will be allowed to pay half the tax they are due to pay, which is wrong. These are not abstract figures but resources that in many cases are desperately needed to fund our schools, hospitals and infrastructure and to invest in both job creation and retention and to protect Ireland from the negatives impacts of Brexit.

There is also uncertainty about how the scheme will be monitored in obtaining a knowledge development box, KDB, certificate. The invention by the company will have to be novel, non-obvious and useful. The terminology is extremely ambiguous. Therefore, who will determine which companies will meet the conditions laid down? Will it be the Patents Office alone? It is also unclear how much tax will be forgone following the introduction of the KDB certificate.

How does the Minister expect Members to support the legislation when we do not know what liability the State will assume once it has been introduced? This is being done during the worst housing and health crisis ever in the State when most public services have been squeezed to the bone.

It is also unclear how many small and medium enterprises will make investments in research and development activities to avail of the proposed measure. As we are all well aware, it is the large corporations rather than SMEs that like to use these types of loopholes and which, in many cases, have the resources and ability to access them. It is stated in the roadmap for Ireland's tax competitiveness that we must place ourselves in the best possible position to become the country of choice for mobile foreign direct investment in a post-BEPS - base erosion and profit shifting - environment. Do we really want to introduce further loopholes to attract companies because of a cheap tax regime, while we hammer citizens with a litany of unfair taxes?

The Bill and the implementation of the knowledge development box, KDB, scheme will also require changes to the current patent process. It is unclear if the KDB certificate process will be cheaper than the patent process. I ask the Minister to address that issue.

The changes in the patent process will allow third parties to make written observations on a patent application to the controller before a patent is granted. Who are these third parties? It is startling and unbelievable that the Irish Patents Office relies on the UK patents office to provide a patent search report in deciding if an Irish patent should be granted. Will the Minister explain exactly why this is still the case? This scenario will surely have to be reviewed in the light of Brexit. When the Bill was drafted and the concept of a knowledge box introduced, the Brexit referendum had not yet taken place. Where does the decision on Brexit leave us and what specific action is the Minister taking to address the issue? It is also unclear whether the changes proposed in the Bill will have implications for the cost of a new patent. When will this be made clear?

Sinn Féin is sceptical about introducing further tax avoidance schemes. In the roadmap to which I referred reputation is regarded as a key pillar. Ireland's reputation was damaged considerably by the aptly named double Irish arrangement. In 2013, the Minister for Finance announced that we did not operate a tax haven, yet one year later he closed down the double Irish mechanism. I do not want our reputation to be damaged further by the introduction of a replacement scheme. Political parties and elected officials from across the political spectrum should, in the interests of the people they represent, ensure highly profitable companies will are tax responsible and pay tax in a transparent manner at the appropriate rate of 12.5%.

There are two pillars, rates and regimes. As I indicated, Sinn Féin supports the 12.5% corporation tax rate provided tax is paid at this rate. As part of our all-Ireland strategy, we would welcome this rate even more if it applied on an all-lreland basis. Brexit will be a game changer and we need to be ready for it. In the past, our tax regime has been probed in the United States, Australia, Britain and, most recently, by the European Commission. It is important to note that knowledge development box-type schemes introduced in other jurisdictions are being examined, questioned and probed by other authorities.

A mature debate on Ireland's corporation tax regime and reputation is required. Sinn Féin wants Ireland to be a responsible member of the international community, with no clouds hanging over our tax reputation. The right of the Government to set its own tax rates, including the corporation tax rate, is one Sinn Féin has always defended, particularly in Brussels. However, the introduction of a research and development loophole and knowledge development box, with tax rates of as low as 6% and 6.5%, will leave another cloud hanging over us.

The evidence to date is that knowledge development boxes have been used internationally as a tax avoidance tool in many cases. This legislation will only entrench such a negative perception. There are fairer ways of encouraging investment in research and development than introducing a measure that will undoubtedly be used by some corporations to avoid paying taxes.

As the Minister will be aware, Sinn Féin introduced amendments to the legislation in the Seanad, some of which we will resubmit on Committee Stage and, if necessary, Report Stage because the Government has not addressed our concerns. I ask the Minister to address the points I have raised in the interests of restoring our reputation and ensuring we create a fair and equal society, particularly for businesses.

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