Knowledge Development Box (Certification of Inventions) Bill 2016: Report Stage

I welcome the Minister of State, Deputy Pat Breen who is becoming a frequent visitor. Before we commence, I remind Senators that a Senator may speak only once on Report Stage, except the proposer of an amendment who may reply to the discussion on the amendment, and that on Report Stage each amendment must be seconded. There is no one present to move amendment No. 1 in the names of Senators Pádraig Mac Lochlainn and Máire Devine.

Amendment No. 1 not moved.

Amendments Nos. 2 and 3 are physical alternatives and may be discussed together. If amendment No. 2 is agreed to, amendment No. 3 cannot be moved.

Government amendment No. 2:
In page 13, lines 8 to 13, to delete all words from and including "The" in line 8 down to and including line 13 and substitute the following:
"The Controller shall keep records of—
(a) applications,
(b) KDB certificates issued,
(c) refusals to issue KDB certificates, and
(d) reviews,
in such manner and form as he or she considers appropriate.".

I have reflected on the concern expressed on Committee Stage by Senators about the keeping of records by the Controller of Patents, Designs and Trade Marks. I am seeking to address this concern in amendment No. 2 which clarifies beyond doubt the intention that the controller must keep records of all knowledge development box, KDB, applications received, issued, refused and reviewed. The only discretion available to the controller relates to the form and manner in which records will be kept. For example, they may be kept in hard copy or electronically. I trust that the amendment facilitates the withdrawal of amendment No. 3 in the names of Senators Padraig Mac Lochlainn and Máire Devine. When Senator Pádraig Mac Lochlainn raised this issue on Committee Stage, the Minister, Deputy Mary Mitchell O'Connor, said she would seek clarification and come back to the House with an amendment to ensure all records would have to be kept. In that context, I suggest the amendment should satisfy the Senator.

I remind Senator Pádraig Mac Lochlainn that amendment No. 3, in his name, is being considered with this amendment. If amendment No. 2 is agreed to, amendment No. 3 cannot be moved. That might have some implications for the approach the Senator chooses to pursue.

Can I clarify whether the House has moved on from amendment No. 1?

Yes. We had to move on. I cannot go in reverse.

I usually try to facilitate Members, but I would be setting a dangerous precedent if I were to do so in this case.

Does the Senator have concerns about these amendments?

We will agree to disagree and move on. It is my fault. I should have been here on time.

No problem. We can all be tied up. I can understand the Senator is a busy man.

Amendment agreed to.

As amendment No. 2 has been agreed to, amendment No. 3 cannot be moved.

Amendment No. 3 not moved.

As amendments Nos. 4 to 10, inclusive, and amendment No. 18 are related, and as amendments Nos. 5 to 10, inclusive, are physical alternatives to amendment No. 4, amendments Nos. 4 to 10, inclusive, and amendment No. 18 may be discussed together. If amendment No. 4 is agreed to, amendments Nos. 5 to 10, inclusive, cannot be moved.

Government amendment No. 4:
In page 14, to delete lines 18 to 39, and in page 15, to delete lines 1 to 8 and substitute the following:
“KDB report
18. (1) In this section, "KDB report" means the report required to be made under subsection (1) of section 103 of the Patents Act 1992 in so far as this Act is an enactment which falls within paragraph (b) of that subsection.
(2) The KDB report shall include statistical information in a form, and regarding such matters, as the Minister may direct.
(3) The KDB report shall not disclose details of any invention the subject of an application.
(4) The KDB report shall specify—
(a) the number of applications received by the Controller during the year to which the report relates,
(b) the number of applications deemed to be withdrawn under section 8(2), and the number of applications withdrawn under section 10, by applicants during that year,
(c) the number of applications during that year in respect of which the Controller issued a KDB certificate,
(d) the number of applications during that year in respect of which the Controller refused to issue a KDB certificate,
(e) the number of refusals to issue a KDB certificate that were subject to a review during that year,
(f) the number of reviews carried out during that year that resulted in the confirmation of the decision to refuse to issue a KDB certificate,
(g) the number of reviews carried out during that year that resulted in the issue of a KDB certificate, and
(h) such other statistical information as may be prescribed.".

Amendments Nos. 4 and 18 are designed to combine and align the annual reporting requirements under the Bill with earlier reporting requirements on the Controller of Patents, Designs and Trade Marks under the Patents Act 1992. The effect of amendment No. 4 will be to replace the existing section 18 of the Bill in its entirety. The amendment and amendment No. 18 which amends section 103 of the 1992 Act deal comprehensively with the reporting requirements on the controller under all enactments under his supervision.

Senators will recall that during the debate on Committee Stage concerns were raised that the controller's annual report would be submitted to the Minister only. The Minister, Deputy Mary Mitchell O'Connor, indicated in response that she would introduce an amendment to ensure the wider circulation of the controller's annual report on KDB activities. The effect of amendments Nos. 4 and 18 which align all of the controller's annual reporting requirements will be to ensure the Bill provides for the controller's annual report on KDB activities to be submitted to the Minister in the first instance. Importantly, the Minister, in turn, will lay the report before both Houses of the Oireachtas. I believe the amendments address the concerns behind amendment No. 5 in the names of Senators Pádraig Mac Lochlainn and Máire Devine and amendment No. 10 in names of Senators Alice-Mary Higgins and Frances Black.

Perhaps the Minister of State might be able to give further clarification on amendment No. 4 because I think it is important. I recognise that amendment No. 2 was introduced in recognition of the valid points made by Senator Pádraig Mac Lochlainn on Committee Stage about the importance of keeping records. I appreciate that there was some recognition of that issue. I recognise that amendments have been proposed in a few areas of the Bill, for which I thank the Minister of State.

I am concerned about one aspect of amendment No. 4 and would like the Minister of State to elaborate on the key changes he is making in the amendment. How does he consider that they are addressing the concerns we raised on Second and Committee Stages? As I see it, the key change is that the KDB report "shall include statistical information in a form, and regarding such matters, as the Minister may direct". Does the Minister of State believe this provision will address the geographical and regional distribution question which was raised by many Senators on Second and Committee Stages and which is the subject of amendment No. 9 in my name?

I have also tabled amendment No. 10 which proposes that the KDB report include "such general information as to the operation of the scheme as may be appropriate or relevant".

Will the Minister of State indicate how he sees his amendment addressing the concerns raised in amendments Nos. 9 and 10?

Does the Minister of State believe the statistical information could cover amendment No. 7 also? Amendment No. 7 reflects the fact that, under the patents regulation, when they are filed, they are categorised. There is an extraordinarily detailed set of categories in the national report on patents. We may not necessarily need to take on board the same categorisations, but what I am attempting to do in amendment No. 7 is to ensure information would be collected on the sectors involved. If pharmaceuticals and medical devices are key areas of growth or if we are looking for innovation in food production, it would be necessary for the Minister to know if research and development were taking place under these sectoral headings. Nobody is looking for precise information on the exact areas in which there is innovation. Instead, they want to know the areas in which research and development are taking place to ensure sectors prioritised by the State under the Action Plan for Jobs and other initiatives will receive funding. It would also ensure priority research areas in the higher education institutions were being complemented. The amendment would provide for the collection of useful information which could help in planning and providing the bigger picture on what was happening in the State. I have left it very wide as an amendment to allow it to be incorporated in the legislation, even in the Dáil.

Amendment No. 9 is also open in seeking figures for the geographical or regional distribution of applications. Today the Government launched the Action Plan for Jobs, one of its key points being regional distribution. To grow business, as well as an active and vibrant economy which leads to employment, we must ensure there is a regional distribution and an all-Ireland approach, without parts of the country being left behind. To ascertain whether the knowledge development box is proving to be complementary to that goal of regional action, it would be useful if we had geographical and regional information on where research and development were taking place.

These are two key points. The amendments are reasonable. As I understand they may fall, this is my opportunity to speak to them. I apologise for speaking to them at some length. Will the Minister of State clarify how he sees these specific points being addressed? Does he see them falling within the remit of statistical information? Will the statistical information the Minister will be able to direct or require be qualitative as well as quantitative?

I call Senator Pádraig Mac Lochlainn. Once the Minister of State comes back in, there can be no further debate.

I did not protest about the first amendment because we are revisiting the issue now. It is desirable to incentivise and encourage innovation. Today there was a presentation in the Oireachtas on innovation hubs in different parts of Ireland. The problem is when reduced corporation tax rates and responsibility are introduced. We have seen where it has, unfortunately, been abused, with loopholes emerging. The taxpayer and the citizen want to see the maximum level of accountability in this matter.

Coming from the regions, the Minister of State will appreciate that balanced regional development is a significant issue for people living there. When significant tax incentives are given to companies, we must ensure the benefits and job creation are spread geographically across the State. In fairness, the Government’s amendments show that it has listened to the concerns expressed on Committee Stage and attempted to address the issues raised. The wording of amendment No. 4 is too vague. It states, “The KDB report shall include statistical information in a form, and regarding such matters, as the Minister may direct”. On the last occasion we debated this issue the Minister stated the Government did not want to give away some of the sensitive commercial information on some of the companies applying. Accordingly, one might not want to give a specific address, for example. However, if one used one’s imagination, there is a way of identifying how the incentive benefits the region without giving away sensitive commercial information, but it has not happened.

Our core concern has not been addressed. Therefore, I cannot support the amendment. It is too vague and will not give us the information we require. If the Minister of State indicates that he would be willing to address this issue in the Dáil to ensure statistical information will be provided which will clearly demonstrate how the incentive will be availed of across the regions, we could look at that measure. However, if no such guarantee is given, unfortunately, we cannot support the amendment.

For the purposes of clarification, why will amendments Nos. 7, 9 and 10 fall if the Government’s amendment is passed? Can it be explained why they are not complementary?

I understand from the Clerk that they physically overlap. If the Government amendment is agreed to, it will removes the provision the other amendments address.

As amendments pass, line numbers and so forth change in the legislation as otherwise, every later amendment should fall accordingly. Amendments Nos. 7 to 10, inclusive, are not seeking to amend text but to insert it. We often have a case where a new section is inserted into a Bill on Report Stage and subsequent amendments are accepted.

I understand that if the amendment is agreed to, all of this block will fall.

I am not clear on why that is the case. I do not believe that is correct.

That is the expert advice.

It is important. I would be quite happy to support the Government’s amendment, but I would like to have the opportunity to vote on the insertions to be made by the other amendments. I do not believe they need to be contradictory but can be complementary.

If amendment No. 4 is agreed to, it will remove the text the other amendments address.

These are insertions.

Let us suppose the Government amendment is agreed to by the House.

There is no text to be amended or added to.

I ensured the Government amendment was moved, as was my duty. The amendment deletes lines 18 to 39, inclusive, on page 14 and lines 1 to 8, inclusive, on page 15. If it is agreed to, all of those lines will be removed.

Will my amendment not then be inserted between the new lines 27 and 28?

My learned Clerk tells me that it is addressed-----

As I obviously have great respect for our new and wonderfully esteemed Clerk, I will bow on the issue, but I believe this is inconsistent with some other practices.

I know what the Senator is saying. There is some logic to her argument. However, the amendment she has tabled later in this group refers to certain lines.

It refers to line numbers.

It is not necessarily line numbers but certain sections and line numbers. If those lines are removed which is the purpose of the Government's amendment, the Senator's subsequent amendments will have no function. The lines will have already been removed, provided the Government's amendment is agreed to.

I am unconvinced, but obviously for now I will bow to the expertise of the Clerk. I will be keen to receive clarification on the point afterwards. I am surprised by it.

The Clerk has said he will talk to the Senator later if she wants to go through it.

Amendment put:
The Seanad divided: Tá, 25; Níl, 13.

  • Burke, Colm.
  • Burke, Paddy.
  • Buttimer, Jerry.
  • Byrne, Maria.
  • Coffey, Paudie.
  • Coghlan, Paul.
  • Conway, Martin.
  • Daly, Mark.
  • Daly, Paul.
  • Feighan, Frank.
  • Gallagher, Robbie.
  • Hopkins, Maura.
  • Horkan, Gerry.
  • Lawless, Billy.
  • Leyden, Terry.
  • Lombard, Tim.
  • McFadden, Gabrielle.
  • Murnane O'Connor, Jennifer.
  • Noone, Catherine.
  • O'Donnell, Kieran.
  • O'Donnell, Marie-Louise.
  • O'Mahony, John.
  • O'Reilly, Joe.
  • Reilly, James.
  • Richmond, Neale.

Níl

  • Black, Frances.
  • Conway-Walsh, Rose.
  • Craughwell, Gerard P.
  • Gavan, Paul.
  • Higgins, Alice-Mary.
  • Humphreys, Kevin.
  • Kelleher, Colette.
  • Mac Lochlainn, Pádraig.
  • Nash, Gerald.
  • Ó Clochartaigh, Trevor.
  • Ó Ríordáin, Aodhán.
  • O'Sullivan, Grace.
  • Ruane, Lynn.
Tellers: Tá, Senators Gabrielle McFadden and John O'Mahony; Níl, Senators Paul Gavan and Pádraig Mac Lochlainn.
Amendment declared carried.
Amendments Nos. 5 to 10, inclusive, not moved.

Amendments Nos. 11 to 17, inclusive, are related and may be discussed together, by agreement. Is that agreed? Agreed.

I move amendment No. 11:

In page 15, between lines 8 and 9, to insert the following:

“Review and scrutiny

19. (1) The Minister shall, as part of the annual Budget process, produce a report on the operation of the KDB including a consideration of the intersection of the KDB with other tax expenditure measures and its impact on the delivery of an effective tax rate for corporations.

(2) The Minister shall ensure appropriate annual information exchange between the Department of Jobs, Enterprise and Innovation and the Office of the Revenue Commissioners in order to facilitate the publication of information on the cost of this initiative, including the cost to date for the Exchequer in revenues forgone, as part of the annual budgetary process.”.

The Minister of State did not get a chance to answer my questions about the meaning of amendment No. 4 which is now part of the Bill, but I am sure he will do so at the next opportunity he gets. These amendments contain two sets of proposals. Amendments Nos. 11 to 13, inclusive, are variations. In all of the amendments I have tried to put forward several variations. The Department met me to discuss these matters, which I appreciate. Does the Minister of State consider there is any version of the amendments he could take on board? The amendments are in respect of the annual budgetary process. We know that tax measures such as the certificate issued to companies which allows them to pay at a rate of 6.25% on research and development versus 12.5% potentially have a high value, but they are also a significant cost to the Exchequer. It is very important for us to have information on the cost of the knowledge development box. The figures are available from the Revenue Commissioners.

In amendment No. 13 I ask that "The Minister shall ensure appropriate annual information exchange between the Department of Jobs, Enterprise and Innovation and the Office of the Revenue Commissioners in order to facilitate" our having specific "information on the cost of this initiative". I understand the cost-benefit analysis may take place within the Department of Finance or the Revenue Commissioners, but in this amendment I ask that the Minister ensure the exchange of information will happen and that it will be made publicly available as part of the annual budgetary process to enable us to assess the cost of the knowledge development box certificate, whether it is €20 million, €200 million or €2 billion, and rank and set it against other measures we may wish to consider and their potential cost-benefit outcome. My colleague and I, for example, support the idea that we need to invest in third level and research institutions, particularly the institutes of technology which are underfunded for research. We may wish to support greater partnership for innovation in these areas, especially at a key moment of opportunity and when there is a change in the world of higher education globally. This is to ensure we and all those who support the knowledge development box, can stand over the value it gives and its cost when we make budgetary decisions.

One of my amendments concerns the information exchange, while the other refers to a report, but I would be willing to withdraw it, if necessary, because I understand there is another report. I recognise that in amendment No. 18 the Government is going some way towards producing a report, but I am concerned that the amendment refers to accounts of moneys received and paid under this Bill but does not cover revenues forgone in respect of the value of the tax reduction from 12.5% to 6.25%.

We are speaking ahead to amendment No. 18, but it relates very directly to this amendment. If the Minister of State's interpretation of amendment No. 18 is to ensure we would have that information, it would make it easier for me not to press amendment No. 12.

Amendment No. 11 is a combination of the two. I am asking the Minister of State to indicate if he will support amendment No. 11 which includes both proposals, amendment No. 12 or amendment No. 13 which is a very mild amendment in terms of pure information exchange.

Amendment No. 14 is in respect of the report which I acknowledge the Government has included in amendment No. 18. It provides that the report would be presented to the Joint Committee on Jobs, Enterprise and Innovation where it would be discussed. That is a very useful and appropriate forum for its scrutiny. I am not demanding that we have a full Oireachtas debate on it annually, but it would be appropriate to have it discussed at the Joint Committee on Jobs, Enterprise and Innovation. It is not clear in amendment No. 18 if the report will include a consideration of the intersection of the KDB with other tax expenditure measures and the delivery of effective tax rates for corporations, which is an ongoing issue of concern for the Government, as it has made clear. It is important, especially since we have sought and achieved OECD compatibility with this measure, to ascertain how it relates to other measures and how we can ensure it will become part of a wider standard setting narrative in of all of our tax expenditure measures and pushing it forward.

The proposals made in amendments Nos. 15 to 17, inclusive, are almost a separate topic. I apologise for speaking at such length, but the grouping of the amendments by the Bills Office requires it. Amendments Nos. 15 to 17, inclusive, are three variants of the same essential demand. I would appreciate it if the Minister of State indicate if he could support any of them. I have tried to frame this as widely as possible to give as much scope and discretion to the Government on the issue. This is part of the Action Plan for Jobs, about which we talked, and the fact that, as a small nation, we need a joined-up approach in what we do in the areas of enterprise and innovation. We need to make sure every major cog in the wheel, especially a cog that potentially carries significant costs such as the KDB, fits into the wider strategy and picture, the action plan and the measures to which the Government claims to be very committed in the action plan. If there is a lacuna of knowledge of where the KDB fits into things and if we do not have a joined-up approach, it will be hard to track what is happening with companies and our investment in enterprise and innovation. The amendments ask that any company applying for the KDB certificate be asked to indicate whether they are in receipt of other grants, subsidies, tax incentives or any similar enterprise or research and development support from a public or semi-State body. We are not asking for detail on what supports are provided, where and how they were applied for or the amounts. This is a very simple request to know whether they have received support in the past. The second part asks that companies applying for such supports in the future and other enterprise and development supports indicate if they had previously received a KDB certificate. It is a two-way measure. It is about joining the dots. We want to know if companies receiving enterprise grants into which we are putting money are going on to deliver research and development, thereby benefiting from the KDB certificate. It will be valuable to the Government to know whether companies that go to Enterprise Ireland or IDA Ireland and move into a phase of production, for example, a scaling up of operations, have previously benefited from the KDB certificate. It will strengthen the hands of anybody who wants to defend the KDB certificate if he or she can show a connection between companies the research and development of which have been supported and that they are now being supported to move into a period of production. To my mind, that information is very simple and valuable that will allow us to chart the route.

The proposals in amendments Nos. 15, 16 and 17 are almost a separate topic. I apologise for speaking at such length but the grouping of the amendments by the Bills Office requires that. Amendments Nos. 15, 16 and 17 are three variants of the same essential demand. I would appreciate if the Minister would indicate if he can support any of them. I have tried to frame this as widely as possible to give as much scope and discretion to the Government in respect of it. This is part of the action plan for jobs, which we talked about earlier, and the fact that as a small nation we need a joined up approach in what we do in the areas of enterprise and innovation. We need to make sure that every major cog in the wheel, especially a cog that has potentially significant costs such as the KDB, fits into the wider strategy and picture and the action plan and the kinds of measures the Government claims to be very committed to in the action plan. If we have an absolute lacuna of knowledge of where a KDB fits in to things and if we do not have a joined-up approach, it is hard to track what is happening with our companies and with our investment in enterprise and innovation. These amendments ask that any companies applying for the KDB certificate indicate whether they are in receipt of other grants, subsidies, tax incentives or any similar enterprise or research and development supports from a public or semi-State body. We are not asking for detail on what supports, where and how they were applied for or the amounts. This is a very simple request to know whether they have received those supports in the past. The second part asks that companies applying for such supports or other enterprise and development supports in the future would indicate if they had previously received a KDB certificate. It is a two-way measure. It is about joining the dots. We want to know if companies receiving enterprise grants, who we are putting money into, are then going on to deliver research and development, thereby benefitting from the KDB. It will only be valuable to the Government to be able to know that if companies go to htEnterprise Ireland or the IDA and they move into a phase of production, for example a scaling up of operations, did those companies previously benefit from the KDB certificate. It will certainly strengthen the hands of anybody who wants to defend the KDB certificate if they can show a connection between companies whose research and development has been supported and the fact they are now being supported to move into a period of production. To my mind, that information is very simple and valuable information that allows us to chart the route.

We have limited time on Report Stage. I still have serious concerns about the end stage in the current trajectory for companies. I have also mentioned this to the Minister, Deputy Mary Mitchell O'Connor, in the context of the 10% capital gains tax rate for those selling their companies. I worry that we are taking companies on a long journey and then encouraging a cash-out culture. It is a kind of start-up to cash-out culture, which is a real danger. If we want to encourage real innovation, not simply entrepreneurship and speculation but entrepreneurship that is innovation, we need to encourage companies to move to production and grow. That is the practice we should be rewarding and supporting. Prizes for innovation have recently been won in Europe by long-established companies. Sky Tec has been established since the 1990s and has now moved to a new phase of innovation. Companies that are long-established are often also capable of innovation. It is companies such as Sky Tec that are winning European innovation awards 20 and 30 years into their existence on this island. They are the kinds of company we need to be nurturing. I worry that under the current regime, companies such Sky Tec could have been sold and would have been encouraged to be sold at an earlier stage and not reached the scale at which they are now as one of the main companies used by NASA and others. That is a wider point.

Information on the level or frequency of the intersection with the knowledge development box or the other enterprise or research development initiatives might be made available to the Minister. I do not mean that it should be publicly available, but it should be made available to the Minister in order to inform overall jobs, enterprise and innovation strategies. I am asking that the Minister have the information that she needs on where the overlap is between the many schemes administered in this country in respect of enterprise and innovation in order that it will inform the big picture and form part of a national strategy.

These are extremely reasonable amendments. If there is a problem with the third part of the amendment, it is separated. I would appreciate an indication from the Minister of State as to which of the amendments he wishes to support and in which form he wishes to support it. I do not really see how there can be any case against having this information provided in a useful manner.

Is Senator Pádraig Mac Lochlainn seconding amendment No. 11?

Yes. I support all of the amendments. I commend Senator Alice-Mary Higgins. One of the primary responsibilities of legislators is to scrutinise legislation and strengthen accountability. I cannot see how the Government can object to any of the amendments. Regardless of its position on Apple and other things that have come before us, there is serious concern in Ireland, elsewhere in Europe and globally about how tax incentives materialised and how accountants who work for companies or corporations influence decision-making and legislation. The evidence is available internationally. It is our responsibility in these Houses to be sure of the intent. The intent to incentivise businesses looking at research and development to create jobs which are very important to an economy is good, but there needs to be a balance. The legislation, as presented, does not have it. It goes further than the original, but the commitments are too vague. Senator alice-Mary Higgins has done tremendous work in trying to ensure as much as possible that the intent of the legislation and the initiative will achieve its objectives and that companies will use them well.

I look forward to the Minister of State's response. I assume he will support all of the amendments.

Before I speak to amendments Nos. 11 to 18, inclusive, I wish to reassure Senator Alice-Mary Higgins in the light of the comments she has made. One does not want to be too descriptive on the issues about which she spoke. That is important. If one is too descriptive, one confines oneself. Two years down the road, things could be very different and different information could be needed. In that regard, I draw her attention to the catch-all provision about which I have spoken and which is provided for in section 18(2). Subsection (2) provides for the KDB Bill report to include information on such matters as the Minister may direct. In addition, section 18(4)(h) provides for the KDB report to include such other statistical information as prescribed by the Minister. I wish to allay fears about this because I know the Senator has done much work on the Bill and been in constant contact with the Department.

I move to amendments Nos. 11 to 17, inclusive, which are quite interesting. I have listened to the rationale for the amendments tabled by Senators Alice-Mary Higgins and Frances Black, but I do not propose to accept them and will explain why. It might be useful to remind Senators of the intention behind the Bill. The Bill proposes the introduction of the KDB certification scheme for SMEs. The scheme is to be administered by the Patents Office. The process before the office involves the examination of applications to ensure the invention, the subject of the application, meets the criteria of being novel, non-obvious and useful. At the end of the process, if the application meets these criteria, the office will grant a certificate. If not, it will not issue a certificate. A certificate provides the gateway for SMEs to apply for the 6.25% corporation tax rate on profits arising from the invention. The granting of a KDB certificate does not, however, guarantee that the SME will qualify for this lower rate of corporation tax. The Revenue Commissioners will have to consider taxation returns on the basis of the provisions that apply to the KDB scheme introduced by the Minister for Finance in the Finance Act 2015 which came into effect on 1 January 2016. Revenue will, as always, have the ability to obtain the necessary information on the KDB to provide reliable information for the Government on the use of the KDB, including information on revenue forgone to the Exchequer.

I fully understand the Senators' desire to ensure ongoing monitoring and evaluation of existing schemes in the areas of research, enterprise and taxation. This is necessary to protect taxpayers' money and ensure new schemes introduced provide the State with value for money. It is extremely important that we get value for money. I assure the Senators that the process of monitoring and evaluating all research, enterprise and taxation schemes is ongoing, with regular reviews. It must be as it is in the interests of taxpayers to have that transparency. In the case of the KDB, I remind Senators that the report on the taxation expenditures published with the budget in October 2015 provides for an ex ante evaluation of the KDB scheme. The evaluation outlines the basis of the best estimate of tax forgone of €50 million. The €50 million is for all aspects of the KDB, not just the certification scheme aimed at SMEs.

On 18 January my Department published a report on the economic and enterprise impacts of public investment in research and development in Ireland. The study presents evidence that points to a clear link between company engagement in research and development and stronger sales, exports and employment performance. This includes both Irish and foreign-owned firms supported by the enterprise agencies.

I remind Senators that this is a good Bill because it will increase Ireland's attractiveness for foreign direct investment, which is extremely important. I have just come back from a two-day trade mission to Dubai and the interest in Ireland in terms of foreign direct investment and the interest in indigenous companies is second to none. Research and development, about which Senators have spoken, are extremely important in every area because of the types of industry we have in Ireland, whether in med-tech, information technology or whatever else. The Government is investing in research and development. The Bill is important because it benefits small businesses, about which Senator Pádraig Mac Lochlainn spoke. Small businesses are very important in his constituency in County Donegal. They are the backbone of the economy in rural Ireland. Giving small businesses this access is extremely important because we must ensure innovation is the top priority. I have seen in my job that entrepreneurship is ripe. If all of these elements are in place - the Bill and the companies that come in, irrespective of from where they come - it will increase investment in the country. What is also very important is that this will create jobs, which I think most Senators want. I can go into a little more detail afterwards if Senators have further questions about this issue.

I refer to jobs that would be created in order that we could have evidence-based policies, which I believe is a priority. I am literally looking for evidence. I ask the Minister of State to address how the evidence might be tracked.

I might as well read the rest of the response.

Yes. The amendments are grouped. Nobody will be allowed to speak again on them, except the proposer.

I have also taken some notes.

All tax expenditures are reviewed regularly in line with the Department of Finance guidelines for tax expenditure evaluation published in October 2014. These rules apply to the knowledge development box. The evaluation will take place within five years of the introduction of the scheme. That is important for Senators. I think it was a concern for Senator Alice-Mary Higgins specifically. It is also important to point out that the review of the overall KDB scheme will be a matter for the Minister for Finance.

On amendments Nos. 11 to 14, inclusive, I remind Senators that the controller will publish annually information on the activities of the Patents Office regarding the KDB certification scheme. This information will be laid before the Houses of the Oireachtas and will, therefore, be in the public domain, which is something about which I think Senators had concerns. Revenue will have access to the controller's report to the Minister. The information will, however, be statistical and not financial in nature and relate to the KDB certificates only. Information on linkages with other tax measures and revenue forgone will not be known to the controller or the Minister. Such matters are, I believe, the responsibility of the Minister for Finance.

I move to amendments Nos. 15 to 17, inclusive. Given the nature of the process I have just described before the Patents Office, the amendments do not have any place in the Bill. It is open to SMEs to avail of support and incentives that apply under various research and enterprise programmes. As Minister of State with responsibility for employment and small business, I fully encourage SMEs to avail of the available supports in place, build capacity and provide jobs, which is what we are talking about and which is very much central to the Bill.

As I mentioned, evaluation of research and enterprise effectiveness occurs on an ongoing basis. This is the appropriate manner in which to undertake such evaluations. Requiring a company to indicate if it has ever received a grant subsidy or other support is part of the KDB certification scheme. The amendments would add to the burden on such companies and would not add value. The reality is that the focus should be solely on the project in front of the controller. If the project is good enough, it will be approved on the evaluation of the controller. The facts in front of the controller should be sufficient for him or her to decide if the project should receive a patent and a certificate. The less of that-----

To clarify, the amendments were not suggested as criteria for consideration under the KDB scheme; rather, it is simply a question of knowing whether KDB certification has been previously received, etc. It is not for the controller but for the Minister to have that information in order that they can-----

However, it is important that the information before the controller be the information on which he or she should work. That is important. As the amendments are not appropriate to the Bill, I do not propose to accept them.

Does Senator Alice-Mary Higgins wish to respond? She moved the amendments.

I will respond very briefly. I heard the Minister of State say something which is of concern. Am I right in saying he said a cost-benefit analysis of the knowledge development box scheme would be considered within five years? I wish to clarify if that is correct.

Yes. It will take place within five years of the introduction of the scheme.

I believe five years is far too extensive a period and also somewhat contradictory to the Government's commitments regarding equality budgeting, for example, because-----

It will take place within five years.

Perhaps the Minister of State might follow it up and indicate the current policy of the Government in terms of when it envisages carrying out the evaluation. If it is in five years, that would be of concern. I again point out that there is a real concern about our commitment to equality budgeting and ensuring we know the cost-benefit balance to which we have committed. Even the Government has committed to a two thirds to one third ratio, for example, for expenditure, tax measures and so forth. I presume that information will be made available annually, even if a full cost-benefit analysis takes longer. I was concerned by this and would like clarification on the matter. Obviously, we would need to know if, for example, the knowledge development box was to result in billions being taken out of the Exchequer because that would be of high relevance to the annual budgeting process, both in terms of the ratio between expenditure and tax measures and the commitment to equality budgeting. It is important to clarify the matter.

I appreciate that the Department has come some way to meeting us and that it is putting forward the report. Again, I suggest that before it goes to the Dáil, it might be good to give an indicative list. Unfortunately, our group is not represented in the other House, but it would be valuable to produce an indicative list with the kind of statistical and other information the Minister would require or expect in the annual report. It is certainly not comforting to me that the Government regards it as excessive to have a simple test. It could be as simple as having a box to be ticked stateing "Yes" or "No" with regard to whether a company has availed of previous expenditure measures.

When we talk about jobs, we need to be rigorous. I want jobs and this to translate into jobs. The Minister, Deputy Mary Mitchell O'Connor, was very clear that this was for research and development and not directly related to jobs but that it was believed it had that outcome. However, we are denying ourselves the evidence to show that there is a link between the knowledge development box and the creation of employment. If people go to Enterprise Ireland or IDA Ireland and say they want to open a factory and produce a device, we have no way of knowing that the factory and that production have in any way benefited from the knowledge development box. I know that I will be told that the knowledge development box has contributed to the creation of employment and enterprise, but I will be told it hypothetically and not based on evidence. It is a bad sign if a company's commitment to research and development is so slight that the idea of ticking a box to indicate that it previously received grants is too onerous or a disincentive, particularly given the supposed commitment to working with Enterprise Ireland and all of the many robust and important benefits and systems we have in place to encourage companies to grow. It would be a very mild measure.

I note that when the Government will seek to defend the knowledge development box in the future by refusing the amendments, it will have denied itself the evidence. It will not be good enough to say research and development leads to jobs based on some figures from other countries when we have a significant research and development initiative that we are funding and subsidising from the Exchequer but we have not bothered to make a link with other areas of employment or enterprise and anything that leads to production or jobs. The knowledge development box will be floating, separate from any joining of the dots with other enterprise measures. Any Minister who will say we believe the knowledge development box led to this or that employment will have denied himself or herself the evidence. The hypothetical will not be good enough in the future. It is unfortunate that the Minister of State and the Department seem to be willing to deny themselves evidence for this important platform. If we are serious about the economy, enterprise and innovation, we need to be serious about the evidence and the measures in place. We need to ensure the building blocks fit into each other and work together. I want Ireland to be a centre for research, development and innovation, but to achieve this, we cannot simply be throwing pennies into a wishing well and accrediting good things that may or may not happen to the pennies we have thrown into the wishing well. This is an important and simple proposal which would strengthen the hands of the Minister of State and future Ministers who support it. I regret that the Minister of State is not able to support the amendments, in particular, any of amendments Nos. 15 to 17, inclusive, which I believe are very reasonable.

Before I call the Minister of State, I welcome to the Visitors Gallery seven lovely young people who are studying for their masters degrees in Queen's University, Belfast. They are doing a project as part of their placement at Stormont. I am sure some of my colleagues would be interested in something similar happening in this Parliament. I met the delegates earlier. I hope they will enjoy their visit to Leinster House and that they will gain some benefit from how this and the Lower House work.

Senator Alice-Mary Higgins has said she wants Ireland to be a centre of excellence for innovation. Ireland is already a centre of excellence for innovation. That is why it has been so successful on the world stage and entrepreneurship is alive and well. It is why The Wall Street Journal has stated Ireland is now the best centre in the European Union for entrepreneurship. That is something of which we should be very proud. It is that entrepreneurship and innovation which are driving job creation in the country. The research and development that are ongoing, whether at indigenous company or multinational level, are extremely important. The Bill will complement what we are all talking about. We should keep talking up the country because we have a good thing about which to talk. Our reputation is enhanced all over the world, wherever we go. This is the fastest growing economy in Europe. The unemployment figures have come down to 7.1% today and I believe they will continue to fall. The 2017 Action Plan for Jobs was published this morning, with the aim of creating 45,000 jobs this year. That will be done through the innovative companies that continue to strive, even with the challenges and difficulties in the economy.

On accountability, the Senator asked that the annual report go before the Joint Committee on Jobs, Enterprise and Innovation. I suggest the proper place in which to scrutinise such things is the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach, at which there will be an opportunity to scrutinise it with the Minister for Finance, given that this issue relates to taxation.

On amendment No. 15, I reiterate that we are trying to cut down on red tape and bureaucracy. We have to put faith in the controller who has vast experience. It is only right that he see what is on paper in front of him and make his evaluation on the information available. Some of the information could be on that issue, but it is important that we keep it as tight as possible.

I want to clarify that I have not suggested it be part of the controller's evaluation.

That is fine. That is where I am coming from in that regard. I hope the Bill will progress further because it is important legislation. It is an important part of the vision we have for Ireland. We need to ensure there will be more research and development and that we will encourage more people to get involved in research and development, particularly in the patent and invention sector.

Amendment put and declared lost.

I move amendment No. 12:

In page 15, between lines 8 and 9, to insert the following:

Review and scrutiny

19. The Minister shall, as part of the annual Budget process, produce a report on the operation of the KDB including a consideration of the intersection of the KDB with other tax expenditure measures and its impact on the delivery of an effective tax rate for corporations."

I second the amendment.

Amendment put and declared lost.

I move amendment No. 13:

In page 15, between lines 8 and 9, to insert the following:

“Review and scrutiny

19. The Minister shall ensure appropriate annual information exchange between the Department of Jobs, Enterprise and Innovation and the Office of the Revenue Commissioners in order to facilitate the publication of information on the cost of this initiative, including the cost to date for the Exchequer in revenues forgone, as part of the annual budgetary process.”.

I second the amendment.

Amendment put:
The Seanad divided: Tá, 13; Níl, 23.

  • Bacik, Ivana.
  • Black, Frances.
  • Conway-Walsh, Rose.
  • Craughwell, Gerard P.
  • Gavan, Paul.
  • Higgins, Alice-Mary.
  • Humphreys, Kevin.
  • Mac Lochlainn, Pádraig.
  • Ó Clochartaigh, Trevor.
  • Ó Ríordáin, Aodhán.
  • O'Sullivan, Grace.
  • Ruane, Lynn.
  • Warfield, Fintan.

Níl

  • Boyhan, Victor.
  • Burke, Colm.
  • Burke, Paddy.
  • Buttimer, Jerry.
  • Byrne, Maria.
  • Coghlan, Paul.
  • Conway, Martin.
  • Daly, Mark.
  • Daly, Paul.
  • Gallagher, Robbie.
  • Hopkins, Maura.
  • Horkan, Gerry.
  • Lawless, Billy.
  • Lombard, Tim.
  • McFadden, Gabrielle.
  • Noone, Catherine.
  • O'Donnell, Kieran.
  • O'Donnell, Marie-Louise.
  • O'Mahony, John.
  • O'Reilly, Joe.
  • Reilly, James.
  • Richmond, Neale.
  • Wilson, Diarmuid.
Tellers: Tá, Senators Alice-Mary Higgins and Lynn Ruane; Níl, Senators Gabrielle McFadden and John O'Mahony.
Amendment declared lost.

I move amendment No. 14:

In page 15, between lines 8 and 9, to insert the following:

“Committee Scrutiny

19. An annual report on the operation of the KDB including a consideration of the intersection of the KDB with other tax expenditure measures and its impact on the delivery of an effective tax rate for corporations should be presented and discussed by the Joint Oireachtas Committee on Jobs, Enterprise and Innovation.”.

I second the amendment.

Amendment put and declared lost.

I move amendment No. 15:

In page 15, between lines 15 and 16, to insert the following:

“Intersection with wider enterprise and innovation strategy

20. (1) Companies applying for the KDB certificate should be asked to indicate at the time of application whether they are presently or have been previously in receipt of grants, subsidies, tax incentives or other enterprise or research and development supports from a public or semi-state body.

(2) Companies applying for grants, subsidies, tax incentives or other enterprise or research and development supports from a public or semi-state body should be asked to indicate whether they are presently or have been previously granted a KDB

certificate.

(3) Information on the level or frequency of intersection between the KDB and other enterprise or research and development initiatives is to be made available to the Minister for Jobs, Enterprise and Innovation in order to inform overall jobs, enterprise and innovation strategies.”.

I second the amendment.

Amendment put:
The Seanad divided: Tá, 15; Níl, 24.

  • Bacik, Ivana.
  • Black, Frances.
  • Conway-Walsh, Rose.
  • Craughwell, Gerard P.
  • Gavan, Paul.
  • Higgins, Alice-Mary.
  • Humphreys, Kevin.
  • Kelleher, Colette.
  • Mac Lochlainn, Pádraig.
  • Nash, Gerald.
  • Ó Clochartaigh, Trevor.
  • Ó Ríordáin, Aodhán.
  • O'Sullivan, Grace.
  • Ruane, Lynn.
  • Warfield, Fintan.

Níl

  • Boyhan, Victor.
  • Burke, Colm.
  • Burke, Paddy.
  • Buttimer, Jerry.
  • Byrne, Maria.
  • Coghlan, Paul.
  • Conway, Martin.
  • Daly, Mark.
  • Feighan, Frank.
  • Gallagher, Robbie.
  • Hopkins, Maura.
  • Horkan, Gerry.
  • Lawless, Billy.
  • Leyden, Terry.
  • Lombard, Tim.
  • McFadden, Gabrielle.
  • Noone, Catherine.
  • O'Donnell, Kieran.
  • O'Donnell, Marie-Louise.
  • O'Mahony, John.
  • O'Reilly, Joe.
  • Reilly, James.
  • Richmond, Neale.
  • Wilson, Diarmuid.
Tellers: Tá, Senators Alice-Mary Higgins and Lynn Ruane; Níl, Senators Gabrielle McFadden and John O'Mahony.
Amendment declared lost.
Debate adjourned.