Acknowledging that the R&D tax credit has been ‘cumbersome’, Minister McGrath promised greater accessibility as part of the upcoming budget.
With less than four weeks to go before Budget 2024 is announced, Minister for Finance Michael McGrath, TD, has revealed that a simplification of Ireland’s taxation system is top of the agenda to help businesses access supports such as the R&D credit scheme more seamlessly.
Ireland needs to increase funding by at least €2bn to catch up with other innovation-leading countries, according to a recent report on the state of R&D by the Industry Research and Development Group and KPMG.
But a key challenge businesses face when trying to access the popular R&D tax credit scheme is the prevalence of “red-tapeism and bureaucracy”, McGrath said at an event today (13 September), based on feedback received by the Government in the run-up to Budget 2024.
“[Accessing the scheme] has proven to be really difficult and unnecessarily cumbersome,” McGrath told an audience of founders, investors and industry leaders at Scale Ireland’s annual autumn event in the Avolon offices in Ballsbridge.
“I have been engaging with the revenue commissioners and with my own team to ensure that simplification of our taxation system is a theme of the budget, and that we put in place a process that we’ve learned from the feedback that we have received, and we try to make practical changes that enable greater accessibility with the various schemes that are there,” he said.
‘Our relative advantage has narrowed’
And while Ireland now has a record number of people in employment, McGrath said we should not take the statistic “for granted” because of other major domestic and global challenges, including economic headwinds and geopolitical tensions.
Especially around foreign direct investment, or FDI, McGrath said that we need to “continue to renew our offering, keep it fresh, and make sure it is as attractive as possible” as Ireland moves to come under the OECD tax agreement signed two years ago.
As part of the agreement, very large companies that have a turnover more than €750m will have to pay a 15pc corporate tax, while smaller businesses can continue to pay at the existing 12.5pc corporate tax rate that has made Ireland a lucrative destination for FDI.
“What this means is that our relative advantage has narrowed in tax terms, and we have to look at all of the other options that we have available to us to enhance the offering,” said McGrath.
“The banking environment has changed because of the departure of Ulster Bank and KBC, which has narrowed the level of competition within the sector. I have been engaging with the banks to make sure that they play a positive and a proactive role in addressing these challenges.”
Demand for alternative lending platforms has surged in the aftermath of Ulster Bank and KBC exiting the Irish market. Lending platform Linked Finance reached a significant milestone this summer as it surpassed €250m in loans to SMEs across the country.
Founders in attendance included Workvivo co-founder Joe Lennon, Boundless co-founder and CEO Dee Coakley and Capella co-founder and CEO Criona Turley. They were joined by John Flynn of Act Venture Capital, angel investor Louise Phelan, and Barry Brennan of Elkstone.
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