R&D tax credit must change to suit domestic sector – PwC

23 May 2011

A PwC global R&D symposium held today in Dublin has called for Ireland’s R&D tax credit regime to be significantly re-engineered to assist Irish home-grown companies.

Multinational technology companies have largely driven the ecosystem of innovation in Ireland, but Ireland needs to leverage off this advantage to generate its own home-grown technology which in turn can over time become international, the symposium heard.

The competition for high-value R&D activities is intensifying as a multitude of countries ramp up their offerings in this regard.

The symposium was told that while it is absolutely imperative that the Government continually strive to enhance Ireland’s international competitiveness, it is also clear that the ‘one size fits all’ approach of the credit does not necessarily suit the specific needs of the domestic sector.

The Minister for Jobs, Enterprise and Innovation Richard Bruton, TD, has in recent weeks made positive statements regarding his intention to improve the R&D tax credit and make it more beneficial to both the international and domestic enterprise, something PwC has welcomed.

Cherry picking R&D policies

“Ireland can learn a great deal by looking at international R&D policies and cherry picking the ones that are particularly attractive from an FDI perspective but must also not lose sight of what countries are doing for their local economy,” said Stephen Merriman, R&D leader, PwC Ireland.

He cited the example of France, which pays particular attention to young and innovative companies, known locally as Gazelles.

Interesting features are the rate of credit, which can be as high as 40pc in the first year, an excellent refund system which provides an immediate cash flow benefit that would be extremely beneficial to Irish start-ups given the current equity gap that exists, he said. Another important feature is the simplified administration process which encourages small companies with tight constraints to make a claim.