John Paul Phelan (Carlow-Kilkenny, Fine Gael)
Link to this: Individually | In context | Oireachtas source

195. To ask the Minister for Finance if his Department is examining measures to enhance the resilience of Ireland’s corporation tax base by supporting the scaling of growth of indigenous enterprises. [36868/24]

Jack Chambers (Dublin West, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

The importance of indigenous enterprise, in particular small and medium enterprises (SMEs), to the Irish economy is reflected in the Programme for Government commitments.

My Department has a number of tax incentives in place to encourage investment in the economy and in particular in indigenous SMEs. These measures help businesses access investment, scale-up and expand, and include the Section 486C relief for certain start-up companies; the Employment Investment Incentive (EII); the Start-Up Relief for Entrepreneurs (SURE); the Start-Up Capital Investment (SCI); the Key Employee Engagement Programme (KEEP) and the Research and Development (R&D) Tax Credit.

The Section 486C Relief provides relief from corporation tax to new start-up companies who have a corporation tax liability of less than €40,000 for an accounting year. The purpose of the relief is to encourage start-up companies in Ireland thereby creating additional employment and economic activity in the State. Promoting investment and jobs in Ireland is a key part of the Government’s overall strategy – as was recognised when the scheme was extended from three years to five as part of Finance Act 2021.

The EII provides an incentive for investment in SMEs by giving Income Tax relief to individuals who provide equity-based finance to trading companies. This investment assists companies to scale-up, expand and create or retain jobs.

The SURE is a tax relief for entrepreneurs who leave an employment to set up their own company. It provides a refund of Income Tax paid in previous years where the individual establishes a new trading company and invests in that company through the purchase of shares.

The SCI is a tax relief for early-stage micro companies to attract equity-based risk finance from family members.

The KEEP allows certain SMEs to engage key staff in a more cost efficient manner. The scheme is a focused share option programme, intended to help SMEs attract and retain talent in a highly competitive labour market.

The R&D Tax Credit provides companies with a tax credit equal to 30 percent (increased from 25 percent in Budget 2024) of the qualifying expenditure incurred on R&D activities. The R&D Tax Credit is a strategically important element of Ireland’s overall support for research and development activities. Irish R&D supports form part of a suite of measures that ensures Ireland remains an attractive location for both domestic and inward investment.

These tax incentives have undergone significant change in recent years following reviews and feedback from stakeholders. In line with my Department’s Guidelines on Tax Expenditures, these tax incentives are regularly reviewed to ensure they continue to operate as intended and fulfilling their potential for the Irish economy while also representing value for money for the Exchequer and the taxpayer.

In terms of the resilience of our corporation tax base, Government has taken steps to mitigate the risks around highly concentrated corporation tax revenues. The establishment of the two new investment vehicles, the Future Ireland Fund, and the Infrastructure, Climate and Nature Fund, will enable Government to invest a portion of windfall revenues to help prepare for future fiscal challenges. This will prevent these receipts from being used to fund permanent expenditure.

Ultimately, the best way to mitigate the risk of an overreliance on corporation tax is to keep public expenditure growth at sustainable levels, which will be achieved through a balanced budgetary strategy.