Eoghan Murphy (Dublin South East, Fine Gael)
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Question 40: To ask the Minister for Finance if he will reverse the decision of the last Government to withdraw the patent income tax exemption, an important exemption which underlines Ireland's commitment to research and development and which, if restored, would also confirm his commitment to putting research and development at the heart of plans or recovery. [8039/11]

Michael Noonan (Limerick City, Fine Gael)
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The decision to abolish the relief was taken in the light of a recommendation to this effect by the Commission on Taxation. The Commission's views on this relief were quite definitive. It found that it had not had the desired impact on innovation and R&D activity and that, despite various refinements to the scheme over the years, the relief was not a particularly well-targeted measure providing good value for money. The Commission also expressed the view that the relief had not resulted to any great extent in companies carrying out R&D activity and that it was being used in some cases by companies "as a tax avoidance device to remunerate employees". The Government agrees with the conclusions of the Commission and believes that in the current challenging times scarce resources should be focused instead on the R&D tax credit scheme. The R&D credit scheme provides a more direct and effective incentive for enterprises to innovate and invest in R&D activities and the scheme has been enhanced considerably in recent years to make it one of the most competitive of its kind anywhere.

Abolition of the patent income exemption will yield €50 million to the Exchequer in a full year.

The Deputy will be aware that the Programme for Government states that this Government "will reduce, cap or abolish … tax shelters which benefit very high income earners. We will also ensure the implementation of a minimum effective tax rate of 30% for very high earners."

Considering that the patent income exemption had been used as a tax efficient means of rewarding employees and directors, I will not be reversing the decision to abolish the exemption.