John Halligan (Waterford, Independent) | Oireachtas source

The amendments tabled by Deputies relate to the reporting requirements at section 18 of the Bill and seek to expand them quite extensively. For the reasons that I will outline, I do not propose to accept them.

It might be useful to remind Deputies of the intention behind this Bill. This Bill proposes the introduction of a KDB certification scheme for small and medium enterprises. This scheme is to be administered by the Patents Office. The process before the office involves examination of applications to ensure the invention that is the subject of the application meets the criteria of being novel, non-obvious and useful. At the end of this process, if the application meets these criteria, the office will grant a certificate; if not, the office will not issue a certificate although the facility exists for the applicant to seek a review of the application by the office. The office will report on the limited range of activities in which it is involved and is ultimately concerned that the inventions applied for fit the criteria of being novel, non-obvious and useful.

If successful before the office and if a certificate of invention is obtained, SMEs can then apply the 6.25% corporate tax rate to profits arising from the invention. Revenue will consider tax returns on the basis of the provisions that apply to the KDB scheme introduced by the Minister for Finance in the Finance Act 2015 which came into effect on 1 January 2016. Revenue will, in the same way as the research and development tax credit scheme, have the information on the KDB to provide reliable information to Government on the use of the KDB, including information on revenue forgone to the Exchequer.

I know the amendments are prompted by a desire on the part of Deputies to ensure ongoing monitoring and evaluation of incentive schemes provided by the State to develop our capacity in the area of research and to promote enterprise. Ongoing monitoring and evaluation is absolutely necessary to protect taxpayers' money and to ensure that when new schemes are introduced by the State that they are reviewed to ensure they continue to provide value for money. I can assure Deputies that the process of monitoring and evaluation of all of our research, enterprise and taxation schemes is ongoing with regular reviews carried out. In the case of the KDB, the report on tax expenditures published with the budget in October 2015 provides an ex anteevaluation of the KDB scheme. This evaluation outlines the basis of the best estimate of tax forgone of €50 million. This €50 million is in respect of all aspects of the KDB and not just the certification scheme aimed at SMEs.

All tax expenditures are reviewed on a regular basis in line with the Department of Finance guidelines for tax expenditure evaluation published in October 2014. These rules apply to the knowledge development box and an evaluation will take place within five years of the introduction of the scheme. A review of the KDB certification scheme for SMEs will fall within a review of the overall KDB scheme and is a matter for the Minister for Finance.

In respect of amendments Nos. 6 to 8, I remind Deputies that it is the case that the controller will, on an annual basis, publish information on the activities of the Patents Office in relation to the KDB certification scheme. This information will be laid before the Houses of the Oireachtas and will be in the public domain. Revenue will therefore have access to the controller's annual report to the Minister. The information, however, will be of a statistical nature only. Information on linkages with other tax measures and revenue forgone will not be known to the controller or to the Minister. Such matters are the policy responsibility of the Minister for Finance.

In respect of amendments Nos. 9 to 12, given the nature of the process that I have just described before the Patents Office, I do not think that these amendments have any place in this Bill. It is open to SMEs to avail of any and all supports and incentives that apply under various research and enterprise programmes. As Minister of State with responsibility for innovation, I fully encourage SMEs to use all available supports for innovation with a view to leading to increased job creation. As I mentioned, research and enterprise support programmes are evaluated and reviewed to gauge effectiveness on an ongoing basis. That is the appropriate manner in which to undertake such evaluations. Requiring a company to indicate if it has ever received a grant, subsidy or other support as part of the KDB certification scheme adds only to the administrative burden for such companies. As these amendments are not appropriate to the Bill I am not accepting them.

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