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Noonan holds 12.5pc rate to keep multinationals keen

THE Government has promised international investors there will be no change in Ireland's 12.5pc rate of corporation tax.

Finance Minister Michael Noonan said the Government will fulfil this promise which was part of the Programme for Government.

The minister said he was making this promise to Ireland's "friends" in the multinational sector who are continuing to invest in Ireland and Europe. Mr Noonan said the Government had successfully protected this rate even under international pressure and given our fiscal state.

His firm comments come amid continuing pressure, particularly from French President Nicolas Sarkozy, for Ireland's low corporate tax rate to be abolished.


Ireland's low rate is stitched into the European treaties and cannot be changed without the support of the Irish Government. But some experts warn that if France and Germany succeed in re-drawing a new Europe, then measures such as this could be attacked. If this happens though, taxation measures will be very far down the list of priorities for Europe's top politicians.

There was other welcome news with regards to corporation tax in the Budget. Mr Noonan announced that the three-year tax relief that applies to start-up companies and allows them pay less tax in the early years will be extended until 2014. The exemption was due to finish this year.

Other pro-business measures announced include changes to the tax-credit scheme available to companies for research and development purposes. This will encourage companies to spend more money in the area. They will be able to write a larger proportion of this spend off against corporation tax.

For example, the first €100,000 spent on research and development can be used to avail of the tax credit. This is specifically targeted at small and medium-sized businesses.

Companies that outsource R&D activities to universities or elsewhere will also find it easier to claim tax credits.

And in an effort to help companies to support and retain key staff members, there is a new flexibility with the R&D tax credits, which allows businesses to use a portion of the tax credit to reward these individuals with bonuses or higher pay.

The minister explained that it was envisaged this would not end up costing the Exchequer any more money, as such a bonus payment will come from the tax credit already received by that company.

The employee will still pay tax on it and their other income. He warned this change would be closely monitored. "If abused, it will be removed," he said.

Jobs Minister Richard Bruton said the new measures would make it "cheaper and easier" for companies to engage in crucial R&D and to run start-up companies in Ireland.

Irish Independent Supplement