Dáil Éireann Debate, Tuesday - 30 January 2018
144. Deputy Niall Collins asked the Minister for Finance his views on each recommendation (details supplied) as contained in the National Competitiveness Council report, Ireland’s Competitiveness Challenge 2017; his plans to implement the policy recommendations which he has statutory remit for; and the timeframe for implementation. [4049/18]
View answerIn response to the Deputy’s question, I have included the requested information below in relation to the recommendations supplied as contained in the latest National Competitiveness Council report “Ireland’s Competitiveness Challenge 2017”.
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Recommendation |
Response |
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Continue to implement a growth-friendly fiscal stance to further lower the government debt and deficit, reduce the risk of the economy overheating and to build buffers and enhance resilience to external shocks. |
The prudent economic and fiscal policies implemented over recent years have placed the public finances on a more sustainable path and have facilitated on-going economic growth. Ireland’s on-going commitment to meet our obligations under the Stability and Growth Pact will ensure continuing improvements in the debt and deficit ratios. The consolidation measures introduced after the financial and economic crisis led to a sharp reduction in capital investment. The 10 year capital plan will seek to address the ensuing deficits in infrastructural investment. Once major capital projects, boosting potential output and enhancing our competitiveness, have been completed, a debt ratio of 45 per cent of GDP will once again be targeted. A debt ratio lower than specified in the Stability and Growth Pact and the introduction of a Rainy Day Fund will enhance Ireland’s fiscal capacity and our ability to absorb external shocks to the economy. |
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Provide a clear statement on the scope and operational guidelines of the Rainy-Day Fund to serve as a counter-cyclical buffer to adverse shocks. |
The Oireachtas consultation process regarding the Rainy Day Fund (RDF) that I initiated through the publication of my consultation paper on Budget Day last October is still ongoing. My attendance at the Oireachtas Committee on Budgetary Oversight on Wednesday 31 January will provide a significant opportunity to exchange views on the RDF. Following that discussion and consideration by my Department further details on the operational modalities of the RDF will be published in due course. |
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Evaluate the effectiveness of SARP to ensure the scheme is meeting objectives and remains internationally competitive and accessible to enterprises based in Ireland including SMEs |
The Special Assignee Relief Programme (SARP) was introduced by my Department in Budget 2012, with the aim of reducing the cost to companies of assigning skilled individuals and key decision makers from abroad to take up positions in the Irish based operations of their employer or an associated company. A full review of SARP, including a public consultation, was undertaken by my Department and Revenue in October 2014. Subsequent changes were enacted in Budget 2015, which included a number of enhancements to the scheme. Revenue compiles data on the numbers of individuals availing of SARP on an annual basis. The most recent report on SARP compiled and published by Revenue, in respect of the 2015 tax year, highlights the uptake and cost of the scheme on an annual basis since its introduction, as set out in following table below** The consistent increase in the number of claimants and the associated cost of the scheme shows that it is being successful in attracting individuals to Ireland from other arms of Multi-National Enterprises. The report also indicates that the programme is reaching a broad range of industrial sectors, with assignees being spread across IT, Financial Services, Pharmaceutical and Medical, Consumer and Industrial, and Other services. As with all such schemes, SARP remains under review from budget to budget, and I will continue to engage with my colleagues in the Department of Business, Enterprise and Innovation in this regard. |
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Conduct a review of the Irish Tax System as it applies to SMEs and Small Mid-Caps to consider how its competitiveness could be enhanced in the context of Brexit. |
Three year corporation tax relief for start-up companies is an incentive to encourage new business start-up, and therefore create additional employment. This measure provides relief from corporation tax on trading income (and certain capital gains) of new start-up companies in the first three years of trading. This tax relief is due to expire in 2018 and therefore a review of the scheme will be undertaken this year, in line with the Department of Finance’s Tax Expenditure Guidelines. Furthermore, the Knowledge Development Box (KDB) (Certification of Inventions) Act 2017 introduced a new certification scheme to allow smaller companies avail of the KDB without the need to apply for a patent. This is intended to make the scheme more accessible to smaller companies who may not be able to avail of the KDB otherwise. My Department conducted a review of share-based remuneration in 2016 which led to the introduction in Finance Bill 2017 of a new Key Employee Engagement Programme (KEEP) share option incentive for employees of SME companies. The purpose of KEEP is to assist SME companies competing with larger businesses in recruiting and retaining key employees. Also, as I indicated last November, a review of the Employment & Investment Incentive (EII) will be completed in advance of Budget 2019, to ensure it operates as a competitive, efficient and effective measure in accordance with state aid rules and my Department’s Tax Expenditure Guidelines. |
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Consider further changes to the income tax system which will contribute to the decline in replacement rates as part of the Government’s consideration of income tax, and considering the factors encouraging take-up of employment. |
Deliberations in relation to potential income tax measures will take place over the next 9 months, in advance of Budget 2019 which I expect to deliver in October this year. As is the case for each Budget, deliberations in relation to income tax policy measures take into account a wide range of factors, including the distributional impact of tax measures on different household types across a range of income levels and financial incentives to work. For example, the Income Tax and USC Tax Strategy Group paper, produced in advance of the Budget each year and available on my Department’s website at www.finance.gov.ie/what-we-do/tax/the-tax-strategy-group/, contains an ex-ante equality impact assessment of possible changes to the income tax system. Where possible, taking into account the potential scope for income tax changes, this analysis also takes account of the impact of potential measures on financial incentives to begin work or increase hours worked. However I would also note that, when considering the impact of any Budget, it is necessary to consider the budget package in the round, looking at tax and welfare changes together, rather than at taxation measures alone. My Department, independently and in conjunction with other Departments, conducts a number of analyses to examine the distributional and work incentive impacts of possible Budget options and of the final Budget package (see for example www.welfare.ie/en/Pages/SocialImpact2017.aspx). These provide an evidence base on equality and work incentive issues which can be integrated alongside other budgetary considerations. |
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Consider extending the scope of the Foreign Earnings Deduction Scheme to all non-EEA countries. |
The Foreign Earnings Deduction (FED) scheme was introduced by my Department in Budget 2012 to incentivise individuals to seek expansion opportunities for trade into non-traditional export markets for Irish goods and services. The incentive was reviewed in 2014. This resulted in its extension in Budget 2015, with some additional enhancements. In Budget 2017, FED was extended until the end of 2020 in order to provide certainty for potential investors in Ireland, following on from the UK vote to leave the European Union. The question of extending the scope of FED to all non-EEA countries was considered recently in the run-up to Budget 2018. There has been a significant degree of broadening out of the relief in recent years and the full impact of these changes will take time to feed through. Also, such a broad extension to FED as proposed, even when viewed in the context of Brexit, would very likely result in significantly increased costs to the Exchequer, including deadweight costs. Accordingly, I do not intend to progress the proposed change to FED at this time. |
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Broaden the distribution capability and market coverage of the SBCI by adding new on-lenders and working to develop innovative products, thereby serving to drive competition in the SME finance market.
Continue to facilitate partnerships between SBCI and international lenders, especially in non-bank finance, to increase competition and provide alternative sources of finance for SMEs. |
The Strategic Banking Corporation of Ireland’s (SBCI) mission is to deliver effective financial supports to Irish SMEs and, in time, other sectors that address failures in the Irish credit market, while driving competition and innovation and ensuring the efficient use of available EU resources. The SBCI began lending in March 2015. The SBCI uses an on-lending model rather than lending directly, channelling its funds through lending partners, known as on-lenders. The SBCI currently has three bank and four non-bank on-lending partners. The SBCI is engaged with a range of potential on-lenders to broaden its distribution capability and market coverage, subject to robust due diligence processes designed to mitigate risks to Irish taxpayers while optimising funding to Irish SMEs. In October 2016, the SBCI took over operation and management of the Credit Guarantee Scheme (CGS) on behalf of the Minister for Business, Enterprise and Innovation. In 2017, the SBCI developed and delivered an enhanced Credit Guarantee Scheme. Additionally, the SBCI has been developing risk sharing guarantee products to enhance access to finance during the course of 2017. As announced in Budget 2017, the SBCI in conjunction with Department of Agriculture, Food and the Marine, rolled out a €150 million Agriculture Cashflow Support Loan scheme to provide working capital support to farmers to deal with price and income volatility. The SBCI is also tasked with delivering the €300m Brexit Loan scheme, as I announced in Budget 2018. The Scheme has been developed by the Department of Business, Enterprise and Innovation, the Department of Agriculture, Food and the Marine, and Enterprise Ireland. The SBCI engaged with the European Investment Fund (EIF) to utilise its Innovfin counter guarantee facility to support the Scheme. The purpose of the Scheme is to assist Irish SMEs and Small Midcap firms (less than 499 employees) affected by Brexit with their working capital needs to allow them to diversify and restructure their businesses and adapt and innovate in response to Brexit. The SBCI is continuing to work on a number of risk sharing initiatives, particularly the continued use of guarantees with European counter-guarantees to support lending by finance providers, which aim to address sectorial market failures and recognising the collateral limitations of SMEs and collateral obligations of banks. Risk sharing initiatives are open to banks and non-bank lenders. The SBCI’s engagement at a European level continues with regular discussion with the European Investment Bank Group (EIB and EIF) on new initiatives emerging under European Fund for Strategic Investment (EFSI). |
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Expedite the development of a commercial property price register encompassing data on commercial sales and leases. |
This is not a policy matter for the Minister for Finance. However, I would like to advise that there is a commercial leases register published by the Property Services Regulatory Authority. |
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Consider the development of an appropriate regulatory framework for the crowdfunding market (including peer-to-peer lending) to enhance consumer confidence and encourage increased lending activity. |
Crowdfunding is an emerging and innovative industry that is growing. The Irish crowdfunding market is nascent and comparatively small. Equally, while the European crowdfunding market has been growing it is still relatively small and growing at a relatively low rate. A public consultation on the potential regulation of crowdfunding was carried out by the Department of Finance in 2017. Based on the findings of the public consultation carried out, there was general support from the crowdfunding industry and stakeholders for the regulation of crowdfunding in Ireland and it was felt that regulation would be beneficial to both industry and consumers. The main concern was that regulation might be overly burdensome or onerous and stifle or hinder the development of the industry. Subsequent to the public consultation, the European Commission proposed a pan-European regulatory regime for crowdfunding in its 2018 work programme. The Department of Finance will monitor the progress and developments on this and implement European regulations as necessary. |
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Ensure the R&D tax credit and Knowledge Development Box incentives provide value for money and remain internationally competitive, accessible and relevant to evolving enterprise needs. |
My officials and I are cognisant of the need to monitor the cost and effectiveness of both the R&D Tax Credit and the Knowledge Development Box, as we do all tax expenditures. In accordance with the Department of Finance’s Tax Expenditure Guidelines, we are committed to undertaking regular reviews of all tax expenditures. The Department of Finance undertook a review of the R&D Tax Credit in 2016, which is available at the following link: www.finance.gov.ie/wp-content/uploads/2017/07/1610-R-and-D-Credit-Evaluation-2016.pdf |
** Table on SARP
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Year |
No. of Employees |
Tax Cost of Relief |
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2012 |
11 |
€0.1 million |
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2013 |
121 |
€1.9 million |
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2014 |
302 (+249%) |
€5.9 million |
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2015 |
586 (+194%) |
€9.5 million |
