Saturday 20 October 2018

Budget 2015: New 'knowledge box' tax incentive scheme to be targeted in EU probe

Minister for Finance Michael Noonan TD during a Budget 2015 press briefing at Government Buildings, Dublin
Minister for Finance Michael Noonan TD during a Budget 2015 press briefing at Government Buildings, Dublin
Ailish O'Hora

Ailish O'Hora

THE Government's new "knowledge box" tax incentive scheme for multinationals looks set to come under an EU review of such regimes designed to establish whether they breach State-aid rules.

Earlier this year, the Ecofin Council made up of EU finance ministers ordered the Commission to launch a review such incentives and it is already examining schemes in countries like the UK, Belgium, Spain and France with Ireland set to come under the spotlight.

Finance Minister Michael Noonan announced the "knowledge box" tax incentive scheme for multinationals in Budget 2015 this week alongside plans to abolish  the so-called "double Irish" tax loophole.

Such a scheme allows Governments to offer companies that make profits from the likes of patents a tax rate that is lower than the standard corporation tax rate - in our case that is 12.5pc.

But the "knowledge box or "patents box" is already causing ructions in Europe.

Earlier this year, the UK's "patents box" came under fire from the Germans.

"That's no European spirit," said Germany's Finance Minister Wolfgang Schaeuble, commenting on the scheme in July. "You could get the idea they are doing it just to attract companies."

While the Government here is still consulting on the issue, there has been speculation that the "knowledge box" intellectual property rate could be half the corporation tax rate.

And although it is highly unlikely, a rate as low as 2.5pc has also been mooted.

Whatever the rate is, it is likely to court more criticism.

Our 12.5pc rate has been long criticised by other European partners like the French who believe it is in itself tantamount to State-aid for the likes Google, Apple and Facebook - multinationals that have European bases here.

The European Commission's findings are due to be published by the end of the year.

 

Online Editors

Business Newsletter

Read the leading stories from the world of Business.

Also in Business