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Despite a boost for education, R&D benefits didn’t make the priority list.
Opportunities for Ireland to continue the momentum in terms of creating a competitive environment for cutting-edge research and development (R&D) appear to have been squandered in Budget 2018.
As Brexit looms, Ireland’s third-level institutions and fourth-level research bodies will soon find themselves pinned in competition against rival UK institutions that will be bristling from the loss of access to vital EU supports.
‘Given that Ireland’s expenditure on R&D falls short of the EU average, it was disappointing that the Minister for Finance did not look to improve the R&D or Knowledge Development Box regimes’
– IAN COLLINS
There is a clear need for Ireland’s research landscape to ensure it is fighting fit when Brexit becomes a reality.
However, the momentum that has gathered in recent years in terms of Knowledge Development Boxes (KDB) to attract industry collaboration and investment appears to have petered out.
Although the Minister for Finance and Minister for Public Expenditure and Reform Paschal Donohoe, TD, announced education spending for 2018 of more than €10bn, a new peak for the sector and 16.6pc of total expenditure, little or no detail was revealed about enticing and encouraging research investment.
“The quality of the Irish education system, our students, research and graduates has been a cornerstone of our economic success, attracting foreign business, nurturing indigenous businesses and fostering innovation,” Donohoe acknowledged.
While €310m will be spent on infrastructure in third level to 2021, no mention of tax incentives to encourage industry collaboration was made.
Donohoe said that in the coming weeks, the Minister for Education will announce details of an additional €200m public private partnership (PPP) investment in the sector that will support regional development.
“Building on the significant funding in higher education provided last year, the increased investment announced today will help improve our competitive advantage, provide for our ongoing economic success, and mitigate the risks and uncertainty of Brexit.”
Attracting innovation
Failure to outline measures to encourage innovation and industry collaboration has been described as disappointing by commentators.
Ian Collins, tax partner and head of R&D tax services at EY Ireland, said: “Given that Ireland’s expenditure on R&D falls short of the EU average, it was disappointing that the Minister for Finance did not look to improve the R&D or Knowledge Development Box regimes, given his comments regarding the need for the economy to innovate, attract investment and be competitive in a post-Brexit world.
“For example, as other countries introduce OECD-compliant patent box regimes, in order to live up to its billing as ‘best in class’, the Irish KDB regime could have been extended to include capital gains on qualifying IP assets in order to remain competitive.
“The Minister introduced additional investment for the higher and further education sectors.
“One change to the R&D regime to further encourage collaboration between the private sector and third-level institutions could have been a review of the 5pc subcontractor restriction, which is currently in place on R&D activities outsourced to third-level institutions,” Collins recommended.
