Ireland is among the world’s most competitive locations for R&D investment, according to a new study by accountancy firm Mazars.
The Mazars’ study undertook an evaluation of the cost of global R&D initiatives after tax and other cost incentives in 20 countries. Of the 20 countries examined, eight with attractive R&D tax regimes were analysed in depth to ascertain the most effective tax rate for companies making R&D investment.
Of the eight countries examined – Australia, Canada, France, Ireland, Israel, Netherlands, UK and the USA – Ireland had an effective tax rate of 1pc, making it the second most competitive of these eight countries. Israel, which had the most competitive effective rate at -6pc, topped the rankings.
According to Noel Cunningham, tax partner with Mazars, changes introduced on R&D tax credits in recent Irish budgets have greatly enhanced the attractiveness of investing in R&D here by both Irish and multinational companies.
Top 2 countries for corporation tax rates
“A tax computation was completed for each country to determine the after-tax cost of a given level of R&D expenditure so as to arrive at an effective tax rate. Israel and Ireland had the best corporation tax rates at 11.5pc and 12.5pc respectively. However, Israel’s regime provides for grants of 50pc of the R&D investment whereas Ireland provides a tax credit of 25pc. This is where Israel leads the rest of the world in terms of supporting R&D investment,” Cunningham explained.
“IDA Ireland has been successful in attracting R&D investment to Ireland from leading multinationals. So far this year, 14 companies have made R&D announcements, including IBM investing €66m in its first smarter cities technology centre, which will create 200 jobs and a €23m investment by Analogue Devices in Limerick.
“Based on our analysis, Ireland should attract continued R&D investments to Ireland,” he added.
According to Cunningham, there are also a number of critical non-tax factors which multinationals consider when evaluating a location for R&D investment. These include: the availability of qualified research institutions; the education level of available workforce; the cost and availability of resources, facilities, equipment and materials; the proximity of the R&D location to the multinational group’s existing operations; a country’s intellectual property (IP) laws regarding ownership and protection of IP; and a country’s political stability.
“Ireland rates highly on all of these critical factors, although the Government’s failure to meet its Lisbon agenda targets for 3pc of GDP to be invested in R&D is a cause for concern,” he said.
“Recent media reports have highlighted concerns expressed by Trinity College Dublin, which forecasts that the numbers of post-doctoral research staff in the university will fall by 67pc and post-graduate research student numbers by 33pc in the academic year 2015-16. Clearly, without a strong base of indigenous researchers and research facilities our attractiveness as a location for R&D investment will diminish.”
Article courtesy of Businessandleadership.com