Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

The decision that was made by the then Minister, Deputy Noonan, at that point on the management of capital allowances and the rate at which their depreciation could be discounted in the tax code was the right decision then on the basis of what we understood about the magnitude of those assets then, on the basis of how we treated at that point other assets in the tax code, and on the basis of how intangible assets were taxed in other countries against which we would benchmark ourselves and against which we need to be competitive for investment, for the registration of assets and for the maintenance of jobs. The decision that I am making to go back to the 80% is the right one now. I have made a policy choice. I made that policy choice in consultation with my officials because, of course, the Department of Finance outlines choices to me and gives views on this matter.

It is fair to say, as it was acknowledged by a number of speakers, that the Seamus Coffey report laid out a broad policy direction on this, but it is up to me regarding the timing and how it is implemented, and as Minister for Finance I have made that policy choice. I have made that policy choice for two reasons. First, I looked at the value of intellectual property assets as we understand them now, the way in which they move across the world and the impact that they have on payments that the Exchequer needs to make, and I decided that now it is right to tax them in the way I have described in the Finance Bill, and that is what I have done.

On the reason for the timing and how I have done that, I believe there is an opportunity for Ireland across the coming years to get to a point where we have employment, research, manufacturing and the registration of intellectual property assets related to all of those activities all located in our country. Getting to a place where we have both commercial activity and employment and registration of assets related to that work - all, or most of it - located in Ireland for a company, it is my judgment that, over the years ahead with all of the change that could develop around our country, this could offer a new form of competitive advantage to Ireland. That is why I have made the choice on the timing of this.

It was acknowledged, in fairness, by those who are criticising what I have done, that this affects the timing as to when the tax will come in rather than the magnitude of the tax itself. The expectation is that, if those companies stay present in Ireland and if the assets remain located in Ireland, at a point in the future we will gain those tax payments, and this decision is about affecting the timing of when we will be able to receive that tax revenue. I made that choice, as I explained a moment ago, because I believe bringing in this tax change in the way I have done will best serve and allow us to meet an opportunity that is there for Ireland to tax these assets better and combine the location of these assets with other forms of economic activity in our country. I was not under pressure to make this move. It was something that formed a core recommendation of the Coffey report and I made that recommendation myself.

I already answered questions on Committee Stage about who I met about this, but I will answer again. I met the American Chamber of Commerce. In my meeting with the American Chamber of Commerce, this matter did not come up. However, I had many meetings with my officials on this and other policy choices that were presented to me, and in those meetings the officials outlined different options that were open to me, and I made this choice.

Returning to a question that was asked about what happened in 2014 when the treatment of it was changed, it is important to put on the record of the House that the reason this was done, and it has also led to reasons I have now decided to make this change, was to change the tax treatment of these assets, to bring it into line with how some of these assets were taxed elsewhere, and to bring the treatment of those assets into line with how we taxed comparable assets in the tax code then. That is the reason it was done. It is important to acknowledge that in the subsequent period, other changes have taken place across the world, primarily driven by the OECD base erosion and profit shifting, BEPS, process that is under way, that have changed how those assets are taxed elsewhere.

It meant that companies which have incredibly valuable designs or brands looked for new places in which to locate. They are the policy reasons behind that change. I have made this change now because I believe this is the fairest and most effective way for us to tax very valuable assets such as these.

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