Alice-Mary Higgins (Independent) | Oireachtas source

I welcome the Minister back to the House. I thank her for bringing this Bill through the House. The Bill proposes to expand access to the preferential tax rate for income generated on intellectual property and patents under the premise of nurturing innovation, encouraging companies to locate high-value jobs in Ireland, and promoting economic growth. I accept that the development of indigenous business and the attraction of foreign direct investment are important for economic growth and job creation in Ireland. I recognise the appeal of putting in place a competitive offering for knowledge-based investment related to research and development and innovation at a time when growth in OECD economies is driven increasingly by investment in the development of new products and technologies.

I have some concerns, however, about the knowledge development box. They relate largely to the context in which it fits. I refer to the substantial research and development tax credits that Ireland already provides, which credits cover a wide range of eligible expenditures and offer the same rates to all types of companies. I am concerned that the already-existing generous tax credit regime, combined with the knowledge development box, may have the potential to undermine Ireland's delivery of the other aspect of the OECD, which relates to the standards. I welcome the fact that this legislation is an attempt to comply with the base erosion and profit-sharing directives of the OECD. I am looking more to the wider context in which it fits, however. Since Ireland had considerable reputational damage in the past, it is crucial that we maintain and strengthen our repetition in this area. There are some concerns associated with the rate of 6.25%. I would be much happier about this measure if we were also delivering on an effective corporate tax rate. We are still seeing headlines about companies and corporations that are paying tax at almost minimal levels. To my mind, while I can absolutely imagine scenarios in which companies would benefit from the proposed measures and use them for development, I believe that if they are also using a wide range of other tax measures to avoid taxation, we need to monitor very carefully what is occurring. We could be facing scenarios in which we again see the kinds of figures associated with companies paying tax at an effective rate of almost 0% or 2%, 3% or 4%. I recognise it is a completely different sector.

We have advocated in the past the enforcement of an effective tax rate in Ireland. That would give greater credibility to this suite of measures. I would like to see movement on that. It would make it much easier to work with these specific or targeted measures. At present, we see companies putting together a combination of measures to reduce their tax bill to extraordinary low levels, unfortunately. It is hollowing out our national resources. We must ask whether we can afford it and that is why I am asking whether the Department has evaluated the cost, the distributive impact and appropriateness of the knowledge development box proposal. If this information were available for Committee Stage, it would be really useful.

I would like to see a cost-benefit analysis of the knowledge box proposal. I am sure many of my colleagues would like to have it in an informed debate on the Bill. We need to recognise that this measure will have a cost in terms of tax revenue. The Minister highlighted some of the potential benefits for companies and also highlighted her hope in regard to job creation but my concern is that the benefits are not nailed down as clearly as they might be. At present in Ireland, we rightly invest in the creativity of companies and in the development of enterprise in companies. We also have very favourable tax measures for those who are selling their companies. I am concerned that we might see circumstances in which companies will be sold after we invest in them and after we deliver enterprise and innovation grants and allow companies to use measures such as the knowledge development box to ensure they do not pay high tax during their research and development period. When sold, we do not get tax revenue. I am concerned that we will see products developed and nurtured here and supported by what is in the end public moneys forgone without any guarantee that the final benefits will stay in Ireland or translate into job creation. In fact, due to our measure on the sale of companies, there is quite an incentive to sell to international actors, who may well choose to have the final product of the research and development produced elsewhere in the world. That is the context.

Many of my concerns do not relate specifically to the Bill but I would like to hear more from the Minister on how she sees it fitting in to the journey these companies are taking and how we can be sure of the benefits to society in terms of employment and the tax take at some point. This is the overall picture on which I would love more clarity and information.

I have two small points. Corporate tax incentives are not the primary driver of the development of competitive business in the industry sector. Investment in infrastructure, education and skills development, together with appropriate business regulations, is also a key driver of business and economic growth. It is notable that neither Finland, Japan, Sweden, Denmark, Switzerland nor Germany, which have very high business expenditure on research and development but relatively low total government support in this area as a percentage of GDP, has research and development tax incentives. They are obviously doing other things that are driving research and development. When we talk about the cost benefits, I would like to see why we are choosing the tax route as our driver rather than greater emphasis on infrastructure and educational development, for example.

We focus here on private research and knowledge development. How does the Minister see public research and development fitting into this? We know that the masters of the technical colleges spoke very eloquently recently at a meeting of the education committee and highlighted a very strange and anomalous situation.Despite the leading work they are doing in research and development, there is no public funding whatsoever for research in technical colleges. We must ensure that public research is not falling by the wayside while we focus on these measures to drive private research. It is public research that is often in the best position to deliver long-term public dividends, companies, innovations and products that stay within our country.

I have a very small technical question about the operation of this. My colleagues across the House have asked about safeguards. I am concerned that the controller in this context has a considerable responsibility in terms of privacy. It is a very different role to the one it had previously. Senator Mac Lochlainn highlighted concerns about accountability and the resources it would have. I am concerned about who the controller will be accountable to in respect of these privacy aspects. Can we ensure they will not be interested parties in any way? This is not a reflection on the office currently. I am thinking of the future.