Written Answers - Foreign Investment.
Richard Bruton
Question:
98
Mr. R. Bruton
asked the
Tánaiste and Minister for Enterprise, Trade and Employment
if the EU has rationed the number of new mobile foreign investments which IDA Ireland can support with State aid; whether this ration has been broken down into regional quotas; the way in which splitting the country into two regions for EU aid will impact upon the level of support which IDA Ireland could offer projects in the different regions; and if she will make a statement on the matter.
[23514/98]
As part of the agreement reached with the EU Commission on the introduction of a standard rate of 12.5 per cent corporation tax by 2003, it has been agreed that the annual number of new projects to be grant-aided by IDA Ireland in the transition period will not exceed the average of the last five years, that is, 77 projects per annum. This is intended to limit the number of new companies which may become eligible for the 10 per cent rate which the Commission deems to be an unacceptable State aid.
Companies already liable for the 10 per cent rate will retain liability for that rate until 2010 for eligible activities.
Expansions by existing companies are not restricted in any way and there are no constraints on where firms may choose to locate.
Government support to enterprise must conform to the limits set by the EU regional aid guidelines, the latest version of which will come into effect, generally, in January 2000. The guidelines lie within the competence of the Commission.
At present, the development agencies can offer assistance to enterprises of up to 57 per cent of investment costs in the non-designated areas, up to 71 per cent in the designated areas and up to 75 per cent in Gaeltacht areas. In practice, of course, the assistance offered is well below these limits.
Under the latest EU regulations, Ireland will be treated as comprising 8 Article 92(3)(c) regions (our Regional Authority areas) and each will have a ceiling on the aid which can be offered to enterprise. The limit for each area will depend on its GDP/unemployment rate, but may not exceed 20 per cent of investment costs, with a top-up of up to 10 per cent for SMEs. Not only is the Commission limiting aid payable across the Union to curb harmful competitive bidding between member states, but the new rules reflect Ireland's much improved economic status, that is, we are no longer one of the poorest areas of the EU.
If there is to be a new Objective One region in the area comprising the three sub-regions of the west, midlands and Border, that area will qualify for the highest regional aid status, known as Article 92(3)(a), at present enjoyed by the whole State. The aid limits in this case would probably be in the region of up to 40 per cent of investment costs, with a top-up of up to 15 per cent for SMEs.
The new limits are of course, ceilings. In practice, the agencies will continue to operate on a value for money basis and to offer assistance at the appropriate level in each case.
