Dáil Éireann Debate, Thursday - 22 June 2023
212. Deputy John Paul Phelan asked the Minister for Finance the changes the OECD pillar 2 will have on Ireland's research and development tax credit; whether certain corporations will end up receiving less of a credit; and if he will make a statement on the matter. [30425/23]
View answer213. Deputy John Paul Phelan asked the Minister for Finance if he intends to increase the research and development tax credit; and if he will make a statement on the matter. [30426/23]
View answerI propose to take Questions Nos. 212 and 213 together.
The Research and Development (R&D) Tax Credit is an important feature of the Irish Corporation Tax (CT) system. The primary policy objective is to increase business R&D in Ireland, as R&D can contribute to higher innovation and productivity. More broadly, the tax credit forms part of Ireland’s corporation tax offering aimed at attracting FDI and building an innovation-driven domestic enterprise sector. The credit enables Ireland to remain competitive in attracting quality employment and investment in R&D.
The Pillar Two minimum effective tax rate will have an impact on the net benefit to large MNCs of the R&D tax credit. Pillar Two will result in a net reduction in the value of the tax credit for claimant companies that are in scope of the 15% minimum tax. This is because the credit value will be treated as income and therefore becomes subject to the minimum tax.
It has been proposed that consideration be given to increasing the rate of the R&D tax credit, so that affected companies obtain the same net benefit from the R&D tax credit after introduction of the Pillar Two rules.
For claimant companies outside the scope of Pillar Two rules, any increase in the R&D tax credit would be a net increase in benefit as they would not be subject to the 15% top-up tax. It would therefore have an Exchequer cost.
It is intended that this matter will be considered further in advance of Budget 2024.
