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Economic Competitiveness

Dáil Éireann Debate, Wednesday - 20 July 2016

Wednesday, 20 July 2016

Questions (31)

Niall Collins

Question:

31. Deputy Niall Collins asked the Minister for Jobs, Enterprise and Innovation the actions she will take to increase Irish competitiveness given the increased competition from the United Kingdom as a location to establish a business in compared to Ireland; and if she will make a statement on the matter. [22916/16]

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Oral answers (6 contributions)

In light of the recent referendum result in the United Kingdom, I have framed this question in the context of Irish competitiveness vis-à-vis the competitiveness of the UK. I ask the Minister to outline our position on that because we are competing on a day-to-day, week-to-week basis in terms of attracting inward foreign direct investment.

Ireland's competitiveness has improved considerably over the past five years. Ireland has moved from 7th in the IMD’s World Competitiveness Yearbook, up from 16th. Our improved competitiveness has been central to recent strong economic growth.

However, as the National Competitiveness Council has warned in recent months, the global outlook is precarious. The recent UK referendum result adds to the uncertainty in the external environment. The key challenge for us now is to remain focused on the addressing the competitiveness policy areas that are within our control domestically. A programme for a partnership Government is committed to sustaining the focus on structural reform across the economy and to attaining a top tier competitiveness position.

As a first step, last week I brought the council's forthcoming Competitiveness Scorecard to Cabinet where it was discussed. It was also considered by Government yesterday. I will be working with Ministers on the key issues identified by the council. The Government is committed to ensuring fiscal sustainability. We will step up investment in infrastructure. We will drive the implementation of our research strategy Innovation 2020. I will be, and I am, working with the enterprise agencies, IDA Ireland and Enterprise Ireland, on consolidating our trading relationship with the UK and on broadening our trade and investment footprint in growth markets.

I thank the Minister. There are two areas I want to focus on in my supplementary question, first, the tax environment for entrepreneurs, that is, Ireland versus the UK. It is widely accepted by investors that the UK is more competitive than Ireland on taxation incentives for entrepreneurs and attracts more businesses. The UK has a more attractive income tax regime, for example, share option treatment, to attract multinationals and entrepreneurs. That is an issue we have to examine. Capital gains tax incentives for entrepreneurs are also much more favourable in the UK, as the Minister will be aware. For example, the Irish capital gains tax, CGT, rate for entrepreneurs who sell their business is 20%, limited to the first €1 million of gains.

Second, in regard to corporation tax, in budget 2015 the UK Government set a policy objective of reducing it to 18% by 2020 and it has since announced a target of less than 15%, which challenges our corporation tax environment. Given the regime for entrepreneurs and the regime for corporations, what does the Minister believe will be the effect of the reduced corporation tax envisaged in the UK on this country when we are competing for foreign direct investment?

I thank the Deputy. There is huge uncertainty around this issue. The Deputy asked me about capital gains tax and corporation tax. I can assure him that I am working with the Minister for Finance and the Department of Finance. We have put in a submission, as have other interested parties, and we will be following up that in the budget.

The Minister mentioned in her initial reply the recent recommendations of the National Competitiveness Council in its report. To rebut some of what the Minister said, in the World Bank rankings for ease of doing business across 189 economies, we dropped four places to 17th in 2016. At our highest point we were ranked 10th out of 189 and we are now behind Estonia and Macedonia in world rankings. The World Bank report states: "Ireland made paying taxes more costly and complicated for companies by increasing landfill levies and by requiring additional financial statements to be submitted with the income tax return." It went on to outline the complexities of red tape and cost of compliance, which ultimately impacts on our competitiveness. We have dropped to 17th in the rankings and we have also slipped six places in a ranking on how easy it is to start a business. What is the Minister, her colleagues beside her and the Department doing to improve Irish competitiveness, which will help our entrepreneurs and job creators and society as a whole to progress and compete better on the international stage?

I thank the Deputy. He quoted some figures which I will take on board. The World Bank's annual Doing Business report measures and tracks changes in regulations affecting business. Ireland has achieved an ease of doing business ranking of 17 out of 189 economies. That is up two places from the previous year.

The Deputy also asked about tax and, obviously, it is hugely important. UK tax issues are a matter for the UK administration and Parliament. However, we are working on it with the Department of Finance. Our competitive 12.5% corporate tax is underpinned by a competitive regime. That 12.5% rate sticks; it is absolutely written in stone. Our world class research and development tax credit and our best in class OECD compliant knowledge development box are there to make sure that we are competitive. Our low rate applied to a broad base ensures sustainable economic growth which will maintain tax revenues. Ireland's foreign direct investment policy, of which tax is but one part, has attracted real and substantive operations to Ireland - the kind that bring real jobs. We have an enviable track record. Ireland's transparent and competitive tax regime and our membership of the EU continue to provide a certainty that is valued by business. Ireland has an English-speaking business environment, ease of doing business and access to talent and consistently performs well on key international indices. Ireland has a certain, stable and competitive offering. Ireland is, and will remain, a member of the EU and the euro zone.

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