Wednesday, 1 April 2015
8. To ask the Minister for Finance his views on his recent visit to the United States of America; if he will provide details of the companies he met with and an update in relation to any discussions he had pertaining to the knowledge box tax incentive scheme, which is to replace the double Irish scheme following the ongoing consultation process; and if he will make a statement on the matter. [12946/15]
My question relates to the Minister's recent trip to the United States and is to get an account of which companies the Minister met. Will he update the House on any discussions he has had on the so-called knowledge box tax incentive, which is proposed and which I understand is currently out for consultation for a period?
In the 2015 budget, I introduced the new document, A Road Map for Ireland's Tax Competitiveness, to update the objectives set out in the 2013 international tax strategy and to set out a clear path for this country's tax competitiveness into the future. The roadmap set out a comprehensive package of measures designed to reposition Ireland to reap the benefits of sustainable foreign direct investment in a changing international tax landscape.
The knowledge development box, KDB, which the Deputy has asked about, was one of the measures announced in the roadmap. The knowledge development box is not intended to be a replacement for the so-called "double Irish", which was never part of the Irish tax offering, and it was just one example of the many international tax planning arrangements designed by tax and legal advisers to take advantage of mismatches between the tax rules in two or more countries. However, the reality is that the "double Irish" was damaging Ireland's reputation. For that reason, I introduced a change to Ireland's corporate tax residence rules in budget 2015. I view the knowledge development box as a potentially positive measure for Ireland. It is recognised internationally that investment and growth in OECD economies is increasingly driven by knowledge-based investment, which is related to research and development and intellectual property. Putting in place an attractive tax offering for developing and commercially exploiting intellectual property is therefore important to encourage companies to develop their knowledge-based capital in Ireland and for our continued success in attracting foreign direct investment to Ireland.
A public consultation to gather views on how the knowledge development box should operate was launched on 14 January and will remain open until 8 April. The consultation paper invites submissions from interested parties on their views of how the knowledge development box should be designed to ensure it meets the key objective of being the most competitive in class, within the agreed international parameters for fair tax competition in this area. As is the case with all public consultations that have been undertaken by my Department on corporation tax, input is welcomed from all sections of society and I encourage all interested parties to have an input to this process.
With regard to my recent visit to the US, I met people from a number of major multinational companies, representative bodies and tax advisers with the chief executive of IDA Ireland, Mr. Martin Shanahan, to update them on Ireland's international tax strategy. The feedback from investors on the medium-term corporation tax strategy, which is set out in the roadmap document,was very positive.
It would be interesting for the House to know the companies in question. In terms of the development of proposals for the knowledge development box, has the Minister come to a conclusion on the rate or how it will be structured? Does the Minister have a clear vision for that? Has there been much opposition expressed from interested parties through the consultation process? Has the Minister given much consideration to tailoring it for the benefit of indigenous Irish companies as well? We are well aware of the context, which is a changing international tax environment, and specifically continued inward investment, which we all wish to see from foreign direct investment companies. There is a major opportunity for domestic companies to avail of it as well.
Over a number of years, a number of European countries have had patent boxes, which were designed so that intellectual property would be attracted to the countries that had such patent boxes. Patent boxes became controversial and there were discussions within Europe and driven by the OECD to abolish patent boxes completely. Two years ago, I would have said that I did not foresee these being replaced by anything else. Opinion in the OECD and within Europe has come to a point where the specific encouragement of research and development through something analogous to patent boxes is deemed to be appropriate in the tax portfolios of countries. Quite restrictive definitions are being developed. Talks are ongoing at OECD and European level but we now know that the principle of patent or knowledge boxes has been accepted and the parameters are being negotiated actively. I have not decided on the appropriate rate and any innovation we introduce will apply to indigenous companies as well as foreign direct investment companies.
Any tax measures will apply but my question is whether there is a strategy in the Minister's mind or in the minds of his officials as to how that can be tailored to incentivise the uptake by indigenous Irish companies. Will there be specific tailoring of the knowledge development box for the benefit of particular domestic industries and sectors etc.?
We are open to submissions from interested parties and there is a consultative process. Currently, I do not see a need to distinguish between indigenous and inward-investment companies. If the incentives are available through the tax system for research and development, they should apply equally. I cannot see what added advantage could be designed for indigenous companies.