John Deasy (Waterford, Fine Gael)
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Question 55: To ask the Tánaiste and Minister for Finance if he is satisfied with the interpretation by the Revenue Commissioners that relevant contracts tax must be applied to all payments of a construction nature made by a principal contractor, irrespective of whether the payment is being made in the course of their business or not; and if he will make a statement on the matter. [13700/08]

John Deasy (Waterford, Fine Gael)
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Question 57: To ask the Tánaiste and Minister for Finance if his attention has been drawn to the fact that relevant contracts tax is being applied to principal contractors on payments being made in relation to work carried out on their jointly owned principal private residences; his views on whether such work does not involve business related payments; and if he will make a statement on the matter. [13702/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I propose to take Questions Nos. 55 and 57 together.

I am informed by the Revenue Commissioners that the legislation governing Relevant Contracts Tax (RCT) is set out in Sections 530 and 531 of the Taxes Consolidation Act 1997. The general position is that the obligation to operate RCT is placed on a principal contractor as defined in the legislation. Thus, in making a payment to a sub-contractor a principal contractor must deduct and remit to Revenue RCT at 35% of the payment being made, except in circumstances where, inter alia, the sub-contractor has a certificate of authorisation, commonly known as a C 2 certificate. In the latter case, a principal may make the payment without deduction of RCT.

I am also advised by the Revenue Commissioners that the legal obligation on principal contractors to operate RCT is cast widely. Taking construction operations as an example, a principal contractor must operate RCT on payments to a sub-contractor not only where the construction work being carried out relates to a third party construction project but also in a situation where the construction work might be carried out on the principal contractor's private residence. It should be noted, however, that the exposure to RCT in respect of a private residence arises only because the contract payment is being made by a person who is a principal contractor. Payments made in respect of construction work on private residences by persons who are not principal contractors would not give rise to RCT.

John Deasy (Waterford, Fine Gael)
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Question 56: To ask the Tánaiste and Minister for Finance his views on reducing the rate of stamp duty on private educational establishments which are levied at the commercial rate of 9%; if his attention has been drawn to the fact that this rate is a severe disincentive to investment in private education establishments, such as Montessori schools. [13701/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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Stamp Duty on non-residential property is charged at various rates based on the consideration involved and, in this regard, it can be regarded as one of the constituent costs of purchasing a property. It also follows that the costs relating to the purchase of property, including stamp duty and other costs such as legal fees, etc., have to be taken into account when an individual is considering the merits of investing in particular activities, which may include private educational establishments. The Deputy will be aware that all taxes and duties are considered annually in the context of the Budget and Finance Bill.

Brian Cowen (Laois-Offaly, Fianna Fail)
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The seafarers allowance, which is provided for under section 472B of the Taxes Consolidation Act 1997, applies to the shipping industry and under EU rules constitutes a State Aid. The allowance of €6,350 at the marginal rate applies to seafarers who are at sea on a voyage to or from a foreign port for at least 161 days in total in a tax year on a passenger or cargo ship which is registered in an EU Member State's shipping register. Other EU States have a similar concession. The EU has exempted the shipping industry from certain State Aid provisions and has published guidelines (OJ C 205 of July 1997) to this effect. There is no similar exemption for the fishing industry and the extension of the seafarers allowance to fishermen would breach the EU guidelines.

Leaving the State Aid issue to one side, I should point out that since the introduction of the seafarers allowance in 1998 a number of groups have sought the extension of the allowance or the introduction of a similar tax allowance. Such a concession for the fishing community as suggested would almost certainly lead to claims from other workers for similar treatment. The Deputy will appreciate that tax reliefs, no matter how worthwhile in themselves, reduce the tax base and make general reform of the tax system that much more difficult.

Leo Varadkar (Dublin West, Fine Gael)
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Question 59: To ask the Tánaiste and Minister for Finance the reason a ten-year limit has been set on the look-back period for tax credits for research and development in view of the length of time it can take to research and develop certain technologies such as pharmaceuticals; and if he will make a statement on the matter. [13720/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The R&D tax credit scheme is specifically designed to reward increased expenditure on R&D by allowing companies a tax credit of 20% of the increase in qualifying R&D spend as compared with such expenditure in a base year. Following further improvements to the scheme in Finance Act 2008, which fixed the use of the base year 2003 for a further 4 years, qualifying R&D expenditure incurred by a company in any year to 2013 will qualify for a tax credit where it represents an increase over the amount incurred in the base year. This change provides an additional incentive for incremental expenditure on R&D in future years and offers more certainty to industry in relation to the tax credit scheme.

For the years after 2013, the base year will move forward by one year and there will be a 10 year gap on a "look back" basis between the year in which the tax credit is claimed and the base year expenditure used for calculating the credit. Thus, for claims made under the scheme in respect of 2014, the base year will be 2004 and for 2015 the base year will be 2005 and so on.

The planning period for R&D is likely to vary from industry to industry. I have been advised that the average R&D cycle for product research programmes can extend to 8 years and that a longer period can apply in certain industries such as in the pharmaceutical sector. I believe that the 10 year gap which now applies under the tax credit scheme between the year of claim and rolling base year expenditure will accommodate the planning of most R&D cycles and strikes a reasonable balance in this area.