Tax credits for R&D research ‘most welcome’

THE introduction of research and development (R&D) tax credits have been welcomed as a boost to foreign direct investment.

Ann Fitzgerald of PriceWaterhouseCoopers said the changes are certainly good news from the point of view of creating significant multi national business hubs in the Irish economy.

The exemption for disposal of substantial share holdings in trading subsidiaries from capital gains tax and expansion of double taxation relief on dividend income paid to parent companies buy Irish subsidiaries should also help to entice overseas firms to look more favourable on Ireland as a location for regional headquarters.

KPMG and the American Chambers of Commerce in Ireland also welcomed the moves.

They said the changes would boost US direct investment into Ireland and pointed to a new deeper level of engagement by US firms in the context of the Irish economy.

Ms Fitzgerald said that for Irish firms the changes in the tax laws on R&D meant that from here on Irish firms will benefit if they carry out their R&D in their Irish operations.

That will apply also to foreign multi nationals which will make carrying out R&D here that much more attractive, she said.

The tax changes are also expected to make the work of IDA Ireland that much easier. For years it has been attempting to get multinational firms to move up the added value chain in order to secure their presence in the Irish economy.

One of the difficulties is that manufacturing costs have become uncompetitive and firms have been relocating basic manufacturing to former Eastern bloc countries and to Asia, especially China where labour is about one twelfth of the cost in Ireland.