Seán Sherlock (Cork East, Labour)
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Question 98: To ask the Tánaiste and Minister for Finance his views on the introduction of tax incentives for start-up food companies in regions where traditional food industries have gone into decline with a view to developing a critical mass of such companies in an area with major natural advantages and a strong scientific infrastructure; and if he will make a statement on the matter. [7618/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The most significant tax incentive for all companies, whether large or small and across all sectors, is our low rate of corporation tax of 12.5% on trading income and our relatively low rates of tax on other income as compared with other countries. A broad tax base is the price that must be paid to keep tax rates low and low tax rates benefit businesses generally. Any proposal for new tax incentives has to be considered in this context. Moreover, the introduction of specific tax incentives favouring one sector of industry over another would, quite apart from other difficulties, have State-Aid implications which would bring Ireland into conflict with EU law. For these reasons, I have no plans at this time to introduce an additional tax incentive for start-up food companies as suggested by the Deputy.

But I should mention that I am, however, aware of the particular difficulties facing small and start-up companies and I have made a number of changes to the tax system in recent Budgets to improve the position of such companies.

The Business Expansion Scheme (BES) and Seed Capital Scheme (SCS) have been considerably enhanced in recent years. In the case of the BES, individual investors are provided with tax relief at their marginal tax rate in respect of investments of up to €150,000 per annum in certain qualifying companies. The SCS was introduced in 1993 as an incentive to encourage individuals to start up new businesses. Where the individual has complied with certain conditions, the scheme provides a refund of tax paid in the previous six years to employees who leave employment and start their own business. There is an upper limit in any one year of the tax paid on income of €100,000.

In Budget 2007, I increased the corporation tax liability threshold for treatment as a small company in relation to the payment of preliminary corporation tax, from €50,000 to €150,000. This means that companies with a corporation tax liability of €150,000 or less can opt to pay preliminary tax on the lower of 90% of the final liability of the current accounting period or 100% of the liability of the previous accounting period. This measure gives the vast bulk of Irish companies the benefit of a simpler and more straightforward system of payment in respect of preliminary corporation tax.

I also introduced a new measure for start-up companies in Budget 2007 under which new start-up companies with a corporation tax liability of €150,000 or less for their first accounting period do not have to pay preliminary corporation tax for that first accounting period and instead are required to pay their final corporation tax liability when they submit their tax returns (9 months after the end of the accounting period). In Budget 2008, I increased the liability threshold for both of the measures detailed above from €150,000 to €200,000.

The Deputy makes reference to scientific infrastructure and, in this context, I would refer to the R&D tax credit scheme which was introduced in 2004 which enables a company to write-off a tax credit against its corporation tax liability equivalent to 20% of the additional or incremental qualifying R&D expenditure incurred by it in a particular year compared to R&D expenditure in a base year. In Budget 2008, the base year for expenditure which is used to calculate the qualifying incremental expenditure on R&D under the tax credit scheme was fixed at 2003 for a further 4 years to 2013. The change provides an additional incentive for increased expenditure on R&D in future years and it offers more certainty to industry in relation to the tax credit scheme.