Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance) | Oireachtas source

We are very strongly opposed to this Bill. The so-called knowledge development box is being sold as a reasonable incentive to small and medium enterprise to develop our innovative edge. The implication is that the scheme will have a positive benefit on the domestic economy. This is the view expressed by the Government and the Fianna Fáil Party. I do not know what the Labour Party's position is as it is not represented in the Chamber. We will see what its Deputies have to say on how the knowledge development box will benefit small and medium enterprises.

The most recent figures available on the level of tax the corporate sector pays on gross profits refer to 2014, although I understand figures for 2015 will be available soon. The figures show the corporate tax code is full of loopholes that are being used to rob taxpayers of vital tax revenues which could be used to develop infrastructure and fund our universities, the most important locations for the types of innovation and technological developments that would benefit the entire economy. They are also being used to rob the State generally of the revenues it needs for investment in strategic enterprise and industry, infrastructure, public services, technological development and upgrading the education system to make it the real driving force of innovation.

What is being sold as something that is good for the economy and innovation is in reality a massive tax break for profit interests and members of the public need to know the scale involved. The 2014 figures show the corporate sector benefits from tax loopholes worth €35 billion. Gross pre-tax profits for corporations stood at €95 billion in 2014. However, after what are described as deductions and charges, the figure decreases to €65 billion, with further deductions of €4 billion made through another series of loopholes. This means the taxable figure is reduced by €35 billion through loopholes or tax breaks that do not benefit the economy or society. Before considering the introduction of further tax breaks, we must address the current loopholes that have created a gaping hole in the potential tax revenue of the State. Incidentally, the figures I have cited were provided by the Revenue Commissioners.

Large multinational corporations are engaging in aggressive tax evasion or avoidance, whichever term one wishes to use, and some major domestic interests are also benefitting from tax loopholes. It is now proposed to introduce another loophole. The idea that the purpose of the knowledge development box is primarily to benefit small and medium enterprise must be set against the definition of a small and medium enterprise. According to the legislation, a small and medium enterprise is a company with an income arising from intellectual property of less than €7.5 million and global income of less than €50 million. These are not figures we associate with small and medium enterprises. The companies involved will not be corner shops or start-up companies in the local enterprise centre. To set income thresholds of €7.5 million domestically and €50 million globally is to stretch the definition of a small and medium enterprise. Many large companies will benefit from this measure.

However, the bulk of small and medium enterprise in this country will not gain from it. The same old crowd will benefit. What is not clear is how the big multinationals who exceed the thresholds in terms of their global incomes will be prevented from benefitting. We are well aware that they can massage their incomes, and have done so, such that they pay no tax at all or pay less than 1% in tax. They are well capable, through the internal allocation and movement of profits, of reducing their incomes in order to avoid paying tax.

Leaving that aside, in terms of the thresholds, where are the safeguards to ensure big companies such as Apple, Google, Facebook and so on do not set up a number of small companies, or put in place arrangements with small companies that they help to set up, and channel innovations through them? It seems there is nothing to stop that. I suspect that is exactly what they will do. The one thing these companies are very innovative at doing is avoiding tax. They have shown a remarkable ability to navigate around tax codes, usually with the active collusion of the political establishment, as happened here, and possibly, on the part of Revenue, in terms of what happened in the Apple case, although that is not yet clear but certainly has to be examined. We will learn more about that from the investigation into the Apple case but that there was political collusion in terms of tax avoidance of that I have no doubt. That there was collusion in some form or another with Revenue in terms of these tax rulings is a possibility, at least. This is what we are dealing with. Against that background, we are introducing another tax avoidance loophole-incentive based around the notion of intellectual property.

In regard to "intellectual property", it was stated that we are in the world of intellectual property now because of technological invention. This is a very old idea. The Minister of State, Deputy Halligan, as somebody who comes from the left should understand this point. The idea that the entrepreneur's idea is the generator of wealth is not a new idea, rather it is an old idea, and a very right wing idea. The workers making the products do not matter and neither do the people in the call centres selling them. They are irrelevant. There is little value put on them but a lot of value on the person with the brilliant idea yet the person with the brilliant idea gets away with paying no tax while the poor workers producing or selling the products pay taxes at levels that are a multiple of that paid by these brilliant entrepreneurs. Where do most of these innovations come from? When one traces them back one finds that some of the biggest most profitable companies in the world have effectively stolen the ideas for which they hold patents and generate huge profits from public institutions, such as, in the case of America, the military, or in our case, the universities. That is an important point. In Ireland much of the innovation comes not from the military but from our universities. When one traces back the origins of these intellectual properties which have made huge profits for private companies one finds that many of them were developed in universities rather than by the brilliant entrepreneurs who end up with profits that are incomprehensible and on which they pay no tax.

As a student of literature I must point out that up until the poet Wordsworth there was no notion of copyright. Wordsworth was one of the people who championed the notion of individual ownership of ideas.

See this speech in context