Deirdre Clune (Cork South Central, Fine Gael)
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Question 204: To ask the Minister for Finance the steps he has taken and will take to implement the innovation taskforce's key recommendation (details supplied); and if he will make a statement on the matter. [14731/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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As the Deputy is aware, the Report of the Innovation Taskforce was launched in the Science Gallery, Trinity College on 11 March. The Report provides a roadmap for one of the five Action Areas in the Smart Economy Framework and complements the progress which has already been made on other aspects of the strategy. Specifically, it endorses the Government's vision for Ireland as a Global Innovation Hub and suggests that we have the potential to achieve this goal. The Report has made a wide range of recommendations, some involving new initiatives while others call for a reinforcement and better alignment of existing efforts and programmes.

The Report recommends the implementation as soon as possible of the Innovation Fund – Ireland envisaged in Building Ireland's Smart Economy. The purpose of this Fund is to help sustain and further build the domestic venture capital market by attracting top-tier venture capital partners from abroad. I am advised that the National Treasury Management Agency and Enterprise Ireland are providing advice in respect of the Fund and are currently conducting a market-testing exercise.

I understand that the Government will shortly announce the establishment of a High Level Implementation Committee to consider and oversee the implementation of the Taskforce's Report. This Committee will reflect the recent changes in Departmental structures and responsibilities which will be supportive in progressing the Taskforce's recommendations. This implementation process will also need to take account of resources and other constraints facing the Government.

Deirdre Clune (Cork South Central, Fine Gael)
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Question 205: To ask the Minister for Finance the steps he has taken and will take to implement the innovation taskforce's key recommendation (details supplied); and if he will make a statement on the matter. [14735/10]

Deirdre Clune (Cork South Central, Fine Gael)
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Question 206: To ask the Minister for Finance the steps he has taken and will take to implement the innovation taskforce's key recommendation (details supplied); and if he will make a statement on the matter. [14737/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I propose to take Questions Nos. 205 and 206 together.

As the Deputy is aware, the Report of the Innovation Taskforce was launched in the Science Gallery, Trinity College on 11th March. The Report which provides a roadmap for one of the five Action Areas in the Smart Economy Framework and complements the progress which has already been made on other aspects of the strategy set out in the Framework. Specifically, it endorses the Government's vision for Ireland as a Global Innovation Hub and suggests that we have the potential to achieve this goal. The Report has made a wide range of recommendations, some involving new initiatives, while others call for a reinforcement and better alignment of existing efforts and programmes.

I understand that the Government will shortly announce the establishment of a High Level Implementation Committee to consider and oversee the implementation of the Taskforce's Report. This Committee will reflect the recent changes in Departmental structures and responsibilities which will be supportive in progressing the Taskforce's recommendations. This implementation process will also need to take account of resources and other constraints facing the Government.

In relation to the recommendation that the competitiveness of our tax offering to mobile Intellectual Property-rich businesses should be urgently reviewed in conjunction with relevant industry representatives, the Deputy should note that I introduced a new scheme of tax relief for expenditure on intangible assets (which is also denoted as Intellectual Property) was introduced by me in Finance Act 2009.

Under the scheme, relief in the form of capital allowances against trading income is provided in respect of capital expenditure incurred by companies on the provision of intangible assets for the purposes of a trade. The scheme applies to a broad range of intangible assets – either externally acquired or internally developed - which are recognised as such under generally accepted accounting practice and which are listed in the legislation giving effect to the scheme. This is an important new incentive aimed at supporting the development of the knowledge economy and the provision of high quality employment. Intellectual property has become a key source of competitive advantage for business in the global economy and this is now recognised in our tax system.

Notwithstanding that the scheme was only introduced last year, I made further improvements to in the recently enacted Finance Act 2010, specifically section 43 of that legislation. Most of these changes were made after consideration of views provided by industry interests on the scheme. While I will continue to review the scheme and consider the views of industry on its operation and scope, we have to be careful about any suggested move away from our single 12.5% rate on trading profits which has served Ireland well to date and which might be involved in the "Innovation Box" approach referred to in the Taskforce Report.

The Taskforce Report also includes a recommendation that the incremental spend requirement of the Research and Development (R&D) tax credit scheme should be removed entirely, making the scheme volume-based in terms of rewarding R&D expenditure. The scheme was introduced in 2004 and provides for a tax credit of 25% of the increase in expenditure incurred by a company on R&D as compared to its expenditure in a base year which is 2003. The purpose of the scheme is to encourage additional or incremental R&D spend by companies. For companies who commenced to incur expenditure on R&D after 2003, the base year expenditure is nil and all of its R&D expenditure will qualify for the 25% credit.

The Taskforce's recommendation in this area would involve an additional "deadweight" cost to the Exchequer in respect of R&D expenditure that had been incurred without the need for a fiscal stimulus (a fact acknowledged in the Report). Complying with this recommendation would represent poor value for public expenditure, particularly in the current economic environment.

The R&D tax credit scheme has been improved in most Budgets and Finance Acts since its introduction and the significant enhancements introduced in Budget 2009 and Finance (No. 2) Act 2008 will act to make the scheme one of the most competitive of its kind anywhere. The changes introduced in Budget 2009 and Finance (No.2) Act 2008 included: An increase in the rate of tax credit from 20% to 25%; An option to carry-back unused tax credits for set-off against a company's previous year's corporation tax payments, if there is insufficient corporate tax liability in the current year, thereby creating a tax refund;

A further option, if unused tax credits still remain, to claim payment of the remaining unused credits which

will be paid in instalments over a 3 year period;

The permanent setting of 2003 as the base expenditure year under the scheme which means that the scheme will, in effect, become volume-based over time as occurred, for example, in the US.

Deirdre Clune (Cork South Central, Fine Gael)
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Question 207: To ask the Minister for Finance the steps he has taken and will take to implement the innovation taskforce's key recommendation (details supplied); and if he will make a statement on the matter. [14738/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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As the Deputy is aware, the Report of the Innovation Taskforce was launched in the Science Gallery, Trinity College on 11 March. The Report provides a roadmap for one of the five Action Areas in the Smart Economy Framework and complements the progress which has already been made on other aspects of the strategy set out in the framework. Specifically, it endorses the Government's vision for Ireland as a Global Innovation Hub and suggests that we have the potential to achieve this goal. The Report has made a wide range of recommendations, some involving new initiatives, while others call for a reinforcement and better alignment of existing efforts and programmes.

I understand that the Government will shortly announce the establishment of a High Level Implementation Committee to consider and oversee the implementation of the Taskforce's Report. This Committee will reflect the recent changes in Departmental structures and responsibilities which will be supportive in progressing the Taskforce's recommendations. This implementation process will also need to take account of resources and other constraints facing the Government.

In Finance Act 2010, which was signed by the President on 3 April, an existing scheme to attract highly-skilled individuals was significantly enhanced to improve its effectiveness. Initially, in Finance (No. 2) Act 2008, the scheme was aimed at attracting highly-skilled individuals to Ireland who could, in turn, act as "magnets" to attract further economic activity and employment. This was done by deeming the tax liability of such individuals on the foreign employment income to be limited to the greater of (a) the amount of the income from the employment remitted to the State, or (b) €100,000 plus 50% of the income over that amount. The recent changes to the scheme widened its application from non-European Economic Area (EEA) Agreement countries, with which Ireland has a Double Taxation Agreement, to include EU and EEA nationals (other than Irish domiciled individuals) who come to live and work here. In addition, the period for which a beneficiary of the scheme must remain working in Ireland in order to benefit from the relief has been reduced from three years to one year.