John O'Donoghue (Kerry South, Fianna Fail)
Link to this: Individually | In context

Question 230: To ask the Minister for Finance if his attention has been drawn to recent newspaper articles (details supplied) where the use of patent schemes for paint tin lids were used for tax avoidance or evasion purposes; if he will have the matter investigated; if he will bring in amending legislation if this is found to be necessary; and if he will make a statement on the matter. [35972/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
Link to this: Individually | In context

The newspaper articles referred to in the question deal with the concerns raised by certain shareholders in a company about aspects of a royalty payment apparently made in respect of a patent. The Deputy raises the issue of possible tax avoidance or evasion. I am not in a position to comment on that aspect or on the tax affairs of the company in question which are confidential to it and the Revenue Commissioners. I have, however, brought the Deputy's question to the attention of the Revenue Commissioners. Section 234 Taxes Consolidation Act (TCA) 1997 provides for a tax exemption for income received by an individual or company from a qualifying patent subject to an annual limit of €5 million and certain conditions. Section 141 TCA provides a tax exemption for distributions paid by companies from tax-exempt patent income, subject also to certain limits and conditions. The patent income exemption scheme has been in place for over 30 years and the rationale behind the scheme is to encourage research and development and to stimulate inventive activity to the benefit of the economy. Royalty payments qualifying for relief under the scheme must not exceed that which would be payable on an arm's length commercial basis. The relief is also subject to restrictions on the use of tax reliefs by high-income individuals which were introduced in the Finance Act 2006. The ability of high-income individuals to avail of tax reliefs was further restricted in this year's Finance Act.

Changes have been made to the scheme over the years to counter attempts to use the scheme for tax avoidance purposes. If any abuses come to the attention of the Revenue Commissioners which they are not in a position to deal with under existing legislation, I will have no hesitation in changing the legislation governing the scheme to bring such abuses to an end.