Pádraig Mac Lochlainn (Sinn Fein) | Oireachtas source

Does it allow large multinationals off the hook in respect of their tax responsibilities? It is said the knowledge development box is the first such scheme in the world to comply with the terms of the OECD project on base erosion and profit shifting, BEPS, to minimise corporations' efforts to minimise their tax liabilities. It is also said it is to encourage investment specifically in research and development activities by reducing the tax companies pay on earnings. We are all for indigenous Irish companies that can grow and employ significant numbers. One hopes these companies will be much more loyal to the country than those which up and leave overnight once economic conditions deteriorate, as we saw happen post-2008. That said, this measure needs to be seen for what it is, a further tax avoidance measure of which the ordinary Joe Public simply cannot avail. Companies with a turnover up to €50 million will be allowed to pay half the tax they are due to pay, which is wrong.

There is also uncertainty about how the scheme will be monitored in obtaining a knowledge development box, KDB certificate. The invention by the company will have to be novel, non-obvious and useful. The terminology is extremely ambiguous; therefore, who will determine which companies will meet the conditions laid down? Will it the Patents Office on its own?

It is also unclear how much tax will be forgone following the introduction of the KDB certificate. How does the Minister expect Members to support the legislation when we do not know what liability the State will take on in introducing it? This is happening during the worst housing crisis ever seen in the State and at a time when public services have been squeezed to the bone.

It is also unclear how many SMEs will even make investments in research and development activities to avail of this measure. We all know well that it is the big corporations, not SMEs, that love using these loopholes.

It is stated in the roadmap for Ireland's tax competitiveness that it needs to place itself in the best possible position to become the country of choice for mobile foreign direct investment in a post-BEPS environment. Do we really want to introduce further loopholes to attract companies because of a cheap tax regime, while we hammer our own citizens with a litany of unfair taxes? The Bill and the implementation of the KDB scheme will also require changes to the current patent process. It is unclear if the KDB certificate process will be any cheaper than the patent process. I would like the Minister to address that issue.

The changes in the patent process will allow third parties to make observations on a patent application in writing to the controller before a patent is granted. Who are these third parties? It is startling that the Irish Patents Office relies on the UK Patents Office to provide a patent search report in deciding if an Irish patent should be granted. That is unbelievable. Will the Minister explain exactly why that is the case? This scenario will surely have to be looked at in the light of Brexit. When the Bill was drafted and the concept of a knowledge box introduced, Brexit had not happened. Where does this leave us? It is also unclear whether the changes proposed in the Bill will have implications for the cost of a new patent. When will this be made clear?

We are sceptical about introducing further tax avoidance schemes. Again, in the roadmap mentioned reputation is regarded as a key pillar. Let me make the point that that reputation was damaged considerably by the double Irish, which was aptly named. In 2013 the Minister for Finance announced that we did not operate a tax haven, yet one year later he closed down the double Irish. I do not want our reputation to be damaged further by introducing a replacement scheme. Political parties and elected officials across the spectrum should in the interests of the people they represent ensure hugely profitable companies will be tax responsible and pay at the appropriate tax rate of 12.5% in a transparent manner.

There are two pillars, rates and regimes. I have said we support the 12.5% corporation tax rate once tax is paid at that rate. We would welcome this even more on an all-Ireland basis. In the past our regime has been probed in the USA, Australia and Britain and most recently by the European Commission. It is important to note that knowledge development boxes introduced in other jurisdictions are being examined, questioned and probed by other authorities. Sinn Féin believes we urgently need to have a real and mature debate on our corporation tax regime and reputation. We want Ireland to be a responsible member of the International community, with no clouds hanging over our tax reputation. The right of the Government to set its own tax rates, including the corporation tax rate, is one Sinn Féin has always defended, particularly in Brussels; however, the introduction of a research and development loophole and a knowledge development box with a tax rate as low as 6% to 6.5% will introduce another cloud. To date, the evidence is that knowledge development boxes have been used internationally as a tax avoidance tool. This legislation will only entrench such a negative perception. There are fairer ways of encouraging investment in research and development than introducing a measure that will undoubtedly be used by some corporations to avoid paying taxes.

We are holding our position on this legislation and will consider introducing amendments on Committee and further Stages. I would like the Minister to address the points I have raised. Sinn Féin is doing this in the interests of restoring our reputation and ensuring we will create a fair and equal society for all, particularly for all businesses.