Pat Carey (Dublin North West, Fianna Fail)

With this recommendation, Senator Twomey seeks to introduce a volume-based tax credit scheme for research and development, with effect from 2009. There have been calls over the years for the research and development tax credit to become a volume-based scheme in which all expenditure in this area, and not just incremental expenditure, benefits from the tax credit.

This would involve a dead weight cost to the Exchequer in respect of research and development that would have been undertaken without the need for a fiscal stimulus and would represent poor value for public money. Having an incremental scheme has enabled us to provide a high rate of tax credit at 20% which the Minister is now increasing to 25% in this Bill.

This represents a significant contribution to the efforts of companies in the area of research and development and will help improve the competitiveness of Irish industry internationally. In this Bill the Minister is permanently setting 2003 as the base year under the scheme. Expenditure on qualifying research and development in 2003 is the base against which increased expenditure on it in any subsequent year is measured for the purpose of the tax credit.

Under the existing arrangements 2003 will remain the base year, up to and including 2013. It will also now be the base year for all future accounting periods beyond 2013. Given the time value of money, the scheme will become volume based on a gradual basis, but without the short run dead weight costs. Together with the other changes being introduced, including options to ensure the benefit of a research and development tax credit arising in any year will accrue to a company over a minimum of three years, the Minister believes the overall budget and Finance Bill package for the research and development tax credit scheme places Ireland to the fore in terms of similar schemes globally.

For those reasons, I do not propose to accept the recommendation.