Announced by the Minister for Finance Michael Noonan T.D. recently.
Good Morning Colleagues,
You may have seen my commentary on RTE 6 and 9 o’clock News last night, when I stated this was one of the most export oriented Budgets in over a decade.
The IEA have been lobbying the new Government since it was elected at the beginning of 2011 for a number of measures to increase export sales and job growth. Principles amongst the proposals put to Government were;
- Income tax was already very high and must not be increased any further.This has been delivered on in the Budget.
- Expanding into international markets particularly the fast growing emerging BRIC markets required exporting company staff to spend enormous amounts of time in the markets, away from home. To encourage and support those who under take this activity some measure of compensation must be introduced, as is the case in many of our competing nations. This has been delivered on in the Budget, with €5 Million per year being set aside in a Foreign Earnings Deduction Scheme (see below for more details).
- Attracting certain key staff to work in Ireland is a very important part of ensuring on-going development of International corporations in Ireland, and attracting new foreign investment. We were not competitive with other trading nations in this regard .This has been delivered on in the Budget in the Special Assignee Relief Programme (see below for details).
- New product and services creation through R& D was a very important way to ensure Irish exporters remained competitive internationally. But the existing R & D credit system did not encourage small scale development. This has now been corrected in Budget 2012 ( See details below )
- The Corporation tax rate has been once again protected –which although not expected to change, it was an important re –affirmation to international companies providing the bulk of our exports, that we do not intend changing this key metric of their investment strategy.
We are also aware that for many in the transport and logistics sector, who are essential to the export supply chain, the carbon tax will be a burden and this has not been addressed in the way we have lobbied.
There are other elements of the Budget which may not be to everyone’s liking, but the emphasise has been pro – export industry, and on not increasing the direct cost of employment. Hence, in a year when reducing Ireland Budget deficit was essential, this has to be seen as a very good Budget for export industry.
I show below the main items of support for export industry as announced in the Budget 2012 by Minister Noonan;
With best regards
Irish Exporters Association
Promoting International Trade
Much of Ireland’s growth at present can be attributed to the attractiveness of Ireland for inward investment. The Corporate Tax Rate of 12.5 per cent and our place in Europe are central to this. We made a commitment in the Programme for Government to maintain the 12.5 per cent rate and we will do so. The Government have successfully protected this rate even under international pressure and given our fiscal state.
The Government successfully negotiated a reduction of €10 billion in the interest rate margin that was far bigger than originally offered and made no concession on the Corporate Tax Rate.
Today, I want to say to our friends in the multinational sector who continue to invest so strongly in Ireland and Europe, there will be no change in Ireland’s 12.5 per cent Corporate Tax Rate. We promised this in the Programme for Government and we will fulfil this commitment.
While the package of attractions for inward investment has been very successful, I believe with some adjustments more jobs can be created.
As part of that strategy, I will introduce a “Special Assignee Relief Programme”. This will allow multinational and indigenous companies to attract key people to Ireland so as to create more jobs and to facilitate the development and expansion of businesses in Ireland.
After consultation with the Tánaiste, Eamon Gilmore T.D., I am also introducing a Foreign Earnings Deduction to further support our export drive by aiding companies seeking to expand into emerging markets. This targeted deduction will apply where an individual spends 60 days a year developing markets for Ireland in Brazil, Russia, India, China and South Africa – the so called BRICS countries. I will be giving details of these and additional measures in the Finance Bill.
The International Financial Services industry in Ireland has been one of the great export success stories of the last 20 years. The sector employs more than 30,000 people and contributes over €1 billion in tax to the Exchequer. However, financial services are highly mobile and we must compete within a global market to ensure that the sector in Ireland continues to grow. Our commitment to the sector has been reaffirmed in the 5-year strategy for the industry which was launched by the Taoiseach, Enda Kenny T.D., in July this year. I intend to introduce a package of measures in the Finance Bill to support the continued success of the international funds industry, the corporate treasury sector, the international insurance industry and the aircraft leasing industry.
Export growth from the multinational sector is not sufficient to drive the full economic recovery we are seeking. The domestic sector will be the real engine for job creation across the country. Already, indigenous companies in certain sectors are expanding and growing their operations. This Government will support and enhance their efforts through targeted measures for the SME sector.
In addition to the Loan Guarantee Fund and Micro Finance Fund announced by the Minister for Jobs, Enterprise and Innovation, Richard Bruton T.D., I am announcing that:
- The first €100,000 of R&D expenditure of all companies will be allowed on a volume basis for the purpose of the R&D Tax Credit;
- The outsourcing arrangements for R&D purposes will be improved in a targeted manner to allow the greater of the existing percentage arrangement or €100,000;
- Companies will have the option to use some portion of the R&D credit to reward key employees who have been involved in the development of R&D;
- The corporate tax exemption for new start up companies is being extended for the next three years and will be available for companies that commence trading in 2012, 2013 and 2014; and
- As already announced, smaller companies will also be able to avail of the planned foreign earnings deduction where they plan to expand their export markets into the BRICS countries.
I believe that these targeted measures will provide a stimulus for SMEs as they seek to develop, grow and expand their markets. Deputies will also be aware that the Employment and Investment Incentive is in operation since 25 November last. This incentive assists in raising risk capital for firms operating in more sectors of the economy than was previously allowed under the Business Expansion Scheme. Other job creation measures will also be examined with a view to their inclusion in the Finance Bill.