Bernard Durkan (Kildare North, Fine Gael)
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Question 149: To ask the Minister for Finance if he proposes to take steps of a taxation nature to discourage job relocation to low cost economies; and if he will make a statement on the matter. [12749/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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Ireland today must compete in a world where rapid globalisation is providing multinational companies with a myriad of choices as to where to locate their businesses. Ireland is leading the way in attracting these businesses through low direct tax rates, both in personal and corporate taxes. The Government actively pursues tax policies to encourage job creation and retention. It's corporation tax policy is designed at maximising the employment and economic benefits of industrial development by creating an attractive climate for business as well as a positive environment for encouraging investment.

We have made significant reforms in our taxation system aimed at encouraging an enterprise culture at both company and individual level. In this respect at corporate level Ireland offers one of the most beneficial corporate tax environments in the world. Our 12.5% corporation tax rate continues to support the necessary stable enterprise environment which Ireland has so carefully nurtured down through the years. This long-standing policy of our corporation tax has been one of the main elements in the attraction and development of top quality investment here. This legislation sets out the future tax regime for business in clear and unambiguous terms and we do not envisage the rate being amended. I have no doubt that our 12.5% corporation tax rate has significantly helped to create and safeguard record levels of investment and employment here and will continue to do so.

The Government has also established targeted tax incentives to ensure Ireland can compete in this dynamic and knowledge based economy. The new tax credit of 20% for research and development will help to enhance our competitiveness as a location for a new internationally mobile research related investment. It will also encourage existing overseas and indigenous firms to add research functions to their operations in Ireland or to increase their level of research activity.

In an international context, the most recent data available from the OECD shows that, in 2004, for a single person on an average wage, Ireland had the lowest tax wedge in the European Union and one of the lowest in the OECD. A low tax wedge makes it easier for employers to take on new employees. The fact that our unemployment rate is half the EU average is no coincidence.