Dick Spring
Ceist:22 Mr. Spring asked the Minister for Finance if he will indicate if investment in plant qualifies for tax relief under the R & D Scheme of the Finance Act, 1986; and if he will make a statement on the matter.
Ceisteanna—Questions. Oral Answers. - Research and Development Scheme.
To qualify for tax relief under the research and development scheme an individual must invest in shares of a research and development company which carries out a qualifying research and development project on behalf of a sponsoring company. A qualifying research and development project is a project which has as its sole object the development of new or improved industrial processes, methods of products and is carried out wholly or mainly in the State. Expenditure on plant forming an integral part of a bona fide R & D project would be regarded as qualifying expenditure. Normal production plant used to produce goods for sale on a commercial scale would not be regarded as being in use for research and development.
Does the Minister know that widespread concern has been expressed in some circles about the apparent misuse of funds by a mineral water company in respect of a substantial tax allowance that was not used for the purpose intended under the relevant section of the Finance Act, 1986, and is it because of that misuse that the Government decided to terminate in its entirety provision for tax assistance for research and development?
I do know of it. I have received letters that I am sure the Deputy has also received about a mineral water company. The letters seem to suggest that an allowance was used for a purpose for which it was not intended. That arbitration is carried out by the Revenue Commissioners, not by me or anyone else.
I accept that.
The company obviously complied with the scheme, otherwise they would not have been given the benefit. That is not the reason for the scheme finishing. It was introduced in 1986 and was due to end in 1991. All that happened is that the Government did not renew the scheme, it was not renewed for many reasons. First, since its introduction the scheme has been used for only ten projects. Second, there is now a major investment in the science and technology part of the budget, which has increased from £3 million a couple of years ago to £25 million today. The IDA supply facilities in their make-up of grant structure. Of course, research and development is an activity for which money can be received under the present BES scheme. There is no point in having two schemes that run parallel. At any rate, the scheme itself was open to so much abuse that it would have been very foolish to renew it on its existing basis. The Exchequer was lucky in that it was not affected adversely earlier.
Does the Minister have proposals to introduce a form of alternative scheme that would eliminate the potential for abuse?
I am not convinced that there is a need to introduce a new scheme for the variety of reasons I have given. First, the IDA provide grants for research and development. Second, the part of the budget dealing with science and technology finances quite a lot of research and development in that area and has increased from £3 million to £25 million. Third, if a small company is looking for research and development assistance they could qualify under the BES scheme. The market is well and truly covered, and I do not think there should be a surplus of schemes.