R&D summit says Ireland should pay heed to the French Gazelle

A PwC global Research and Development (R&D) symposium held in Dublin this week has called for Ireland's R&D tax credit regime to be significantly re-engineered to assist Irish home grown companies generate a resurgence of Irish industry.

The ecosystem of innovation has been developed principally through the presence of large multinational technology companies in Ireland.

Ireland does however need to leverage off this advantage to generate its own home grown technology which in turn can over time become international thereby generating exports as well as domestic manufacturing capabilities.

The current R&D tax credit regime is attractive internationally and plays a very important role in securing Foreign Direct Investment into Ireland.

The competition for high value R&D activities is intensifying as a multitude of countries ramp up their offering in this regard.

While it is absolutely imperative that the Government remain vigilant and continually strive to enhance our international competitiveness, it is also clear that the 'one size fits all' approach of the credit does not necessarily suit the specific needs of the domestic sector.

The Minister for Jobs, Enterprise and Innovation, Richard Bruton has in recent weeks made very positive statements regarding his intention to improve the R&D tax credit and make it more beneficial to both the International and domestic enterprise.

Those comments are encouraging and improvements to develop a simplified and distinct credit scheme for small medium enterprise would be very welcome.

Speaking at the PwC conference, Stephen Merriman, R&D leader, PwC Ireland said: "Countries are constantly evolving and enhancing their R&D tax policies as innovation is widely considered to be a critical stimulus for economic growth.

"Ireland can learn a great deal by looking at international R&D policies and cherry picking the ones that are particularly attractive from an FDI perspective but must also not lose sight of what countries are doing for their local economy.

"A great example is France who pay particular attention to young innovative companies, known locally as Gazelles. Interesting features are the rate of credit, which can be as high as 40% in the first year, an excellent refund system which provides an immediate cash flow benefit that would be extremely beneficial to Irish start ups given the current equity gap that exists.

"Another important feature is the simplified administration process which encourages small companies with tight constraints to make a claim.

"The announcements to date by Minister Bruton are encouraging and the recently published Finance Bill is an example of the Government taking another positive step in improving the profile of the R&D credit within MnC's while also accelerating the benefits of monetising the credit in certain circumstances, which may benefit the SME sector."