Research and Development Tax Credit Public Consultation ......Research and Development Tax Credit | Public Consultation 07 ii) In the absence of the R&D tax credit, what proportion

Research and Development Tax Credit

Public Consultation Response 7 June 2019

Research and Development Tax Credit | Public Consultation

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7 June 2019

Research & Development Tax Credit – Public Consultation,

Tax Division,

Department of Finance

Government Buildings,

Upper Merrion Street,

Dublin 2.

D02 R583

VIA EMAIL: [email protected]

Dear Sirs/Mesdames:

We are pleased to submit comments on behalf of Deloitte in response to your consultation paper on

the Research & Development tax credit scheme. We appreciate this opportunity to share our view

and trust that you will find our comments valuable to the discussion.

We look forward to continued collaboration with the Department of Finance on this and other tax

initiatives. Deloitte has expert teams in innovation incentives in over 50 countries and we are

available to discuss anything in this document, as needed.

Yours faithfully,

_______________ ______________ Lorraine Griffin Tom Maguire

Partner Partner

Head of Tax and Legal Tax Policy and Technical Services

Deloitte Ireland LLP Deloitte & Touche House 29 Earlsfort Terrace Dublin 2

D02AY28 Ireland Tel: +353 (1) 417 2200 Fax: +353 (1) 417 2300 Chartered Accountants

www.deloitte.com/ie

mailto:[email protected]


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Contents

1. Executive Summary 4

2. Public Consultation Questions 6

i) What are the key considerations to be taken into account when deciding whether

to base your R&D activity in Ireland?

6

ii) In the absence of the R&D tax credit, what proportion of your R&D would take

place in Ireland?

7

iii) As R&D is project driven the annual cost to the exchequer can fluctuate quite

significantly. What steps could be taken to improve advance forecasting of claims

for Exchequer purposes?

7

iv) In your experience, has your decision to conduct R&D in Ireland resulted in you

recruiting additional staff, interns or apprentices?

9

v) The R&D credit allows for limited outsourcing of R&D. Are the limits appropriate?

What is the impact of these outsourcing provisions on third level institutions

and/or smaller firms?

9

vi) What are the factors that are relevant to the relatively low uptake of the current

credit by SMEs?

10

vii) Are there ways of improving the current credit systems to make it more

attractive to SMEs? 10

viii) Having regard to overall Exchequer cost, what measures could be taken to

amend the current relief to improve supports for SMEs carrying out R&D? 10

Other Issues not covered in the paper 11

General comment on the direction you would like to see tax policy in this area develop 12

Appendix – Business comments in relation to the R&D tax credit scheme 13



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1. Executive Summary

Since initial implementation in 2004, Ireland’s research and development (R&D) tax credit regime has

continually evolved and improved, with the last major change to the regime taking effect in 2015 when the

scheme became fully volume based. Business expenditure on research and development (BERD) has

continually risen over the last decade, the uptake of the R&D tax credit scheme has broadly stabilised at

around 1550 claimant companies since 2012. The total exchequer cost of the scheme peaked in 2015 and we

have seen a reduction of 37% of cost in 2017 compared to the level in 2015.

Deloitte’s view is that the tax credit has been, and continues to be, an important stimulus for R&D investment

and in creating new and sustaining existing employment, not just in R&D functions but in downstream

activities such as manufacturing operations and associated functions. The credit is considered to be a major

factor in the decision making process when locating mobile R&D investment, and it is clear that Ireland is

competing against locations around the globe for that investment, in particular Europe and North America,

but also in lower cost jurisdictions such as India and China.

When comparing Ireland’s attractiveness against these other locations, our tax and incentives framework is

shown to be a significant advantage but on other factors such as cost and market access, many companies

considered Ireland to be on a par but a significant proportion of companies feel that Ireland is at a

disadvantage.

As the international R&D environment continuously evolves it is important that the R&D tax credit scheme

evolves with it to ensure that Ireland continues to be successful in sustaining and growing R&D investment

and enjoying the economic benefits that this brings.

In responding to the Department of Finance’s Invitation for Submissions, Deloitte has set out our response

for each of the eight questions stated in the consultation document. Deloitte’s submission is based on our

experience interacting with our client base in preparing and defending R&D tax credit claims and from

research conducted by the American Chamber of Commerce as reflected in the Chamber’s submission. We

have summarised some of the key data from the CSO and Revenue on the next page.


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2. Public Consultation Questions

Section 766 – Tax credit for research and development expenditure

i) What are the key considerations to be taken into account when deciding whether to base

your R&D activity in Ireland?

Business expenditure on R&D in Ireland has grown steadily from €1.76b in 2011 to €2.77b in 2017. The

growth has been fuelled by increased indigenous and foreign investment. Foreign investment is consistently

between 65% and 70% of the total expenditure and the importance of foreign investment to the Irish R&D

environment cannot be understated. A key feature of foreign, and increasingly indigenous investment, is its

mobility. Ireland’s competitiveness on various investment influencers is key in achieving a successful

outcome.

Whether considering new R&D operations or expanding existing operations how the local and national

research ecosystem supports the R&D activity is important in creating a successful and thriving organisation.

Creating an environment where universities and industry complement each other results in a self-sustaining

R&D process in which a supply of entrepreneurial talent, established research structures and Government

policy creates a virtuous circle. The prime example of this is the Cambridge cluster in the UK. R&D incentives

play an important role in this process, both corporate and personal as they can provide a stand out advantage

which can be a differentiator in its own right or compensate for other areas which are less attractive. However

to result in a virtuous circle, R&D incentives have to be considered within the larger environment in order to

ensure that each aspect supplements the other. For example access to a supply of high quality research staff

is critical but where those staff aren’t available being able to attract and retain staff is necessary. The

availability of housing and schools to those employees looking to locate in Ireland, and attractive personal

income taxes is a major factor in the decision for such individuals and their families.

By presenting various decision factors to companies, the level of importance of these factors within the

investment decision process was determined. When comparing locations for R&D, 75% of companies

surveyed considered that Ireland’s business friendly tax environment was better than competitor countries

and nearly 60% said that Ireland’s Government support and incentives were also a key differentiator in the

R&D investment decision process. The survey also demonstrated that for 78% of respondents, the tax credits

were important or critically important in locating R&D investment in Ireland.

Ireland also compared favourably with other countries with regards to our IP and legal environment and the

reputation for performing quality R&D, with approximately one third of companies considering that Ireland

was better than the competition, and half of respondents taking a view that there is no significant difference.

Whilst Ireland holds an advantage in terms of these factors, which in the most part are within the control of

Government Policy makers, the same cannot be said for some of the other aspects of the investment decision.

With regards to cost, the position was reversed.Between 50% and 60% of respondents felt it was broadly

the same, but in approximately a third of cases, competitor countries hold a cost advantage over Ireland.

Whilst cost is not the only consideration when locating R&D investment, it is an undeniably important one.

Ireland is competing in a global environment with companies comparing Ireland with the US, Canada, Europe,

Israel and India and the Far East. Close to home, Switzerland and Germany, the two absentees from having

an R&D tax credit scheme to date, are preparing to implement tax credit systems. Switzerland being a

notable life sciences location for R&D. Switzerland recently voted to implement a 150% super deduction, and

Germany is drafting proposed legislation for a 25% tax credit. Further afield Hong Kong implemented a

super-deduction scheme in 2018 and in 2019 clarified the extent of activities which qualified, which includes

non-scientific or technological research into market, business or management topics, and facilitating

advanced rulings.


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ii) In the absence of the R&D tax credit, what proportion of your R&D would take place in

Ireland?

The €105m of tax credit claimed by the companies completing the survey, represented €420m of qualifying

R&D expenditure in 20171. However those companies only claim tax credits on 54% of their overall

expenditure of approximately €780m on R&D, i.e. much more expenditure on R&D occurs than can qualify

for the tax credit. In our experience the unclaimed R&D activity is made up of development activity on non-

qualifying projects, some work on qualifying projects that does not meet the Revenue’s definition of a

qualifying activity and some R&D activity undertaken outside the EEA.

In the absence of the tax credit, the companies providing employment data estimated that their R&D

workforce would be just under 50% of today’s levels, and their overall workforce would be 37% smaller.

For these companies this represents a reduction in R&D employment of 2100 jobs and overall employment

of 7000 jobs.

It would be wrong to interpret this as the tax credit only incentivising 50% of R&D activity. The 40% dead

weight evaluated in the 2016 Department of Finance review should be related to the carrying out of qualifying

expenditure irrespective of there being a tax credit or not.

These figures are indicative of there being a significant overlap between the large proportion of the overall

R&D expenditure that is not qualifying for the credit and the level of predicted activity in the absence of an

R&D tax credit.

In addition the 40% dead weight evaluated in the 2016 Department of Finance review, may not be

representative of the current climate. R&D tax credits claims2 in comparison to 2015 has reduced by a fifth

when using figures adjusted for timing influences on cash repayments.

iii) As R&D is project driven the annual cost to the exchequer can fluctuate quite significantly.

What steps could be taken to improve advance forecasting of claims for Exchequer purposes?

R&D can be cyclical in nature with the amount of work qualifying for R&D tax credits reducing as products

approach development completion and the implementation phase. Claims consisting of manufacturing

process improvements alongside product related R&D, are often more cyclical, and will fluctuate depending

on the extent and reach of the R&D projects within the manufacturing process. Whilst timing of projects is

the most likely explanation of year over year differences in the scale of claims, industry also reacts to the

outcomes of audits. Commonly held opinion around changes in Revenue’s interpretation of the legislation

(often without a change in legislation) has led to a reduced level of certainty in making a claim. Whilst these

affect the level of claim post the investment decision, the effect inevitably has the potential to influence

investment decision making. A specific example is Revenue’s interpretation on materials costs which was

included in the Guidelines in 2015, whereby any potential value of materials at the end of the R&D process

must be deducted from expenditure claimed. In our experience, a number of companies have felt this impact

and have reduced their claim as a result.

Having a stable regime, with minimal changes and clear definitions and qualifying criteria and expenditure

would contribute to reducing fluctuations in exchequer cost.

The spreading of the tax credit payment over three years also acts as influence. Latest figures published

show the split of the exchequer cost by the use of the credit. Below we have set out the last six years of

1 From American Chamber of Commerce research summarised in the American Chamber submission 2 Calculation using Revenue data, https://www.revenue.ie/en/corporate/documents/statistics/tax-

expenditures/r-and-d-tax-credit-statistics.pdf

https://www.revenue.ie/en/corporate/documents/statistics/tax-expenditures/r-and-d-tax-credit-statistics.pdf

https://www.revenue.ie/en/corporate/documents/statistics/tax-expenditures/r-and-d-tax-credit-statistics.pdf


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available data as cost to the exchequer and amount of tax credit claimed in the year when adjusted to place

all three cash repayments in the year of claim.

2012 2013 2014 2015 2016* 2017*

Cost to the exchequer €283m €421m €554m €708m €670m €449m

Tax credit based on the

expenditure incurred in the year

€305m €578m €618m €567m €586m* €464m*

* Estimation is required for 2016 and 2017 based on the identified cash repayments received and

estimating the 2nd / 3rd repayment amounts, which are not available

This table shows how the three year spread of cash repayments reduced the initial impact of the step change

in R&D activity seen in 2013 (which resulted in increased cash back payments), but also resulted in large

year over year increases in the two following years when the second and third payments were made in 2014

and 2015. Whilst the initial increase in 2013 was a large change relative to 2012, beyond this event t he

qualifying R&D activity between 2013 and 2016 was actually relatively stable, with less than 10% fluctuation

between each year.

It is possible that a factor in producing the year to year swings is a response to audit activity. There was a

55% increase in audits performed by Revenue in 2014 and in the following year tax credit claim amounts

reduced though less than 10% and did pick up the following year. A second significant dip has taken place in

2017, where a 21% drop in the total tax credit claimed has occurred, again only a year or so after Revenue’s

audit activity jumped by 55%. Both jumps in audit activity did not result in a significant increase in yield from

the audits, but may have acted as a deterrent for some companies. This would correspond with our experience

where companies have generally either a positive or negative audit experience, and this is not necessarily

linked to the quality of their R&D or an adjustment of claim.

Potential actions to assist in achieving more predictability could also be a positive step towards addressing

some key criticisms of the scheme.

o Enabling cash repayments in a single year, whilst having an initial timing impact, would appear to

positively impact the variability of the cost to the exchequer.

o An optional pre-approval scheme, which requested forecasted expenditure (including capital

expenditure under S766 and S766A) may assist in the exchequer getting better insight into the

coming years of R&D. For example RD&I grant applications are required to forecast expenditure over

the duration of the project. Whilst this would require administration for claimant and Revenue/DoF,

it would benefit all parties in that Revenue and DoF would gain advanced insight into future costs and

claimant companies would obtain a degree of certainty in relation to their projects. Other countries

have a pre-approval process (for example Greece, South Africa).


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Additionality - the purpose of the R&D tax credit is to promote jobs and investment.

iv) In your experience, has your decision to conduct R&D in Ireland resulted in you recruiting

additional staff, interns or apprentices?

The survey data provides a position with regards to increased recruitment of PhD level staff and interns as a

result of increased R&D activity in Ireland. 73% of responses said it resulted in more PhD opportunities and

76% of responses indicated that additional intern opportunities existed. These roles are those which

characterise a high skill knowledge economy that is desired in Ireland to maintain our position as a leading

research location.

It is our experience that R&D activity and by inference the tax credit, do not merely support the creation of

R&D roles to undertake qualifying projects. There are a variety of additional benefits that are a result of R&D

investment. Firstly the expertise and knowledge resulting from R&D projects is essential in developing

production process and equipment. According to American Chamber research many companies make claims

in both product development and manufacturing process and equipment technology. Having product and

process development working in close proximity makes sense in terms of efficiency, speed of implementation

and product quality and it is our view that R&D functions support the existence of manufacturing operations

in Ireland. Once products are launched they often require ongoing support and further evolution, in particular

in the software/IT space. Again whilst these activities are not necessarily qualifying for R&D tax credit it

makes sense for those roles to be undertaken in the same locations as the original research and development

work to leverage the knowhow and understanding that exists. Of the R&D personnel employed by the

companies providing information to the American Chamber, 64% are included in the R&D tax credit claims

and 80% of companies indicated that the tax credits were important in the decision to create R&D and spill

over jobs beyond R&D functions.

By way of an example we are aware of a company in Ireland which grew R&D operations over several years

based on the success of R&D projects supported by the tax credits, making Ireland a place to perform high

quality and cost effective R&D. Over time the company constructed new facilities for the larger R&D team,

providing a significant building project for the local economy and built a new neighbouring manufacturing site

to house the products and industry leading process developed by the R&D teams. The expansion has meant

the creation of new manufacturing jobs, generated exports and created inbound and outbound supply chain

benefits as well.

v) The R&D credit allows for limited outsourcing of R&D. Are the limits appropriate? What is the

impact of these outsourcing provisions on third level institutions and/or smaller firms?

Within R&D tax credits, sub-contracted R&D is a made up of three main types of expenditure:

Specific problems to be solved that are sub-contracted to third parties or research bodies

Payments to agency staff that are working under the direction and control of the claimant

company

R&D activities such as external testing services, which would be qualifying activities if carried

out in house, even if they may not be R&D for the company performing the work (as

supported by the recent guidelines).

Many R&D performing companies would argue that the latter two items are direct costs that should not fall

under the restriction.

Deloitte believes that increasing the outsourcing limits or by classifying agency staff and third party testing

as a qualifying direct cost, would encourage more outsourcing of R&D into the wider economy such as small

businesses with specific expertise that will be able to develop new products, processes and equipment that

would not take place without an identified customer. However, there is also an argument that increasing the


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limits and allowing the sub-contracting company to claim a larger amount of sub-contracted R&D within the

claim deprives the sub-contractor of the opportunity to claim R&D tax credits on their work.

As a minimum, clarifying the extent to which sub-contractors are able to claim the incremental costs

exceeding the amounts paid by a customer, would be welcome as this would provide some certainty to those

companies which often incur additional expenditure as they undertake R&D on behalf of other companies, to

overcome the challenges associated with the R&D project.

In our experience, it is unusual for companies to find it necessary to restrict claims to the 5%/€100,000 limits

on university expenditure. It is not unreasonable to assume that this is because the amounts involved do not

sufficiently encourage companies to invest the time and money with universities (in particular when

considering the effort to negotiate IP rights). Increasing the tax credit on such expenditure and raising or

removing the limit on this category of sub-contracted R&D may well encourage more companies, particularly

smaller companies, to take this longer term view and work with third level institutions with the knowledge

that the costs will be partly mitigated by the tax credits. Knowledge transfer from universities into industry

has always been a challenge and encouraging such links between companies and research bodies can only

make a positive impact in this regard.

SMEs and the R&D tax credit

vi) What are the factors that are relevant to the relatively low uptake of the current credit by

SMEs?

Our experience is that like large companies, many SMEs partake in a significant level of innovative product

development, however it is often a mix of qualifying and non-qualifying R&D for the purposes of tax credits.

It should also be noted that many SMEs perform qualifying R&D on behalf of their customers and hence

cannot claim the credit.

In the area of self-funded R&D, resources are not always available to SME’s to undertake qualifying R&D as

the time period between the R&D phase and having an income generating product tend to be longer. The

cash flow challenges are compounded by the time between making the claim and receiving the tax credit

payments. The qualification criteria, the consequences of an audit resulting in backdated repayments up to

5 years later, putting in place the processes and documentation to support a claim, and in some cases

negative experience with regards to audits all present barriers to SMEs taking the risk to make the

investment and file R&D tax credit claims.

The quotation below illustrates this.

“As CEO I am reducing the R&D projects within the company due to the onerous nature of reporting

required for the program. I am focusing only on the required rather than a more open approach to R&D

which I think is required in a high tech company. We should be encouraged to take R&D risks. The current

program makes the administration a major features and deterrent for my R&D team.”

vii) Are there ways of improving the current credit systems to make it more attractive to SMEs?

viii) Having regard to overall Exchequer cost, what measures could be taken to amend the

current relief to improve supports for SMEs carrying out R&D?

Large and SME companies typically have the same comments with regards to the R&D tax credit regime,

the most common being:

Lack of certainty in their claim not being adjusted over a five year auditable period

Administrative burden of claiming


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Narrowness of the technical criteria

Differences between the legislation and Revenue’s interpretation within their guidelines

Addressing these issues would benefit all claimants but have a greater impact on SME’s as the financial

risks of incorrectly claiming are felt more acutely by those companies. The following suggestions are

predominantly cost neutral to the exchequer, whilst acknowledging that some timing impacts are not totally

cost free, but the effects are limited to the year of introduction.

o Reducing the auditable period for R&D claims down from 5 years after the end of the accounting

period would particularly assist SME’s as they are more prone to staff rotation. This would be

particularly beneficial for the growing software sector, in which transferrable skills make staff

movements common.

o Reducing the number of cash instalments from three to one, would assist SME’s from a cash-flow

perspective and reduce the financial risk of investing in R&D.

o Facility to pre approve projects/claims to provide certainty on science test (discussed above) in

section (iii).

o Addressing documentation requirements and providing clarity on how claims with large numbers of

projects will be audited.

Other initiatives would have a financial implication, however on the underlying principle that incentivising

R&D creates a long term economic benefit, given that the cost of credit has decreased, restoring the level

of Government investment in R&D tax credits to 2014 levels should, in principle be worthwhile. Potential

considerations would be to:

o Increasing the limits on sub-contracting and/or classifying agency personnel costs and expenses

such as external testing as direct costs

o Increasing the percentage of credit for SMEs

o Enabling companies to offset R&D tax credits against payroll tax liabilities

o Broadening the science test to include more innovation in recognition of Industry 4.0 and the

internet of things having huge future investment potential that could be missed when considered

against the current science test

Other Issues not covered in the paper

Tax credit claims are reducing even though R&D investment in Ireland continues to increase. This reduction

is in the larger claims by large companies. Why is this?

The R&D tax credit environment has become more difficult over recent years and Revenue’s narrowing

interpretation in relation to qualifying expenditure and activities between 2011 and 2015 created uncertainty

and more hesitation to claim. It is not possible to tell the extent to which R&D investment would have had

additional growth without this effect, or whether companies have chosen to simply perform less challenging

development work (more D, less R). Whilst the BERD growth is encouraging, it is preferable that the growth

in qualifying R&D mirrors the overall investment growth so that Ireland continues to develop its status in

performing at the challenging end of the R&D spectrum and ensuring that Ireland maintains its cutting edge

in the research community.


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The Revenue’s R&D tax credit discussion group has been exploring how the documentation requirements of

the R&D tax credit scheme can provide some alignment between the requirements of IDA and Enterprise

Ireland RD&I grants, to assist companies in receipt of both supports and build consistency in the RD&I

incentives space. Deloitte feels that there are aspects of the R&D tax credit scheme which could take a lead

from RD&I grants which would simplify the R&D tax credit process and remove some of the ambiguity on

qualifying expenditure in the area of apportioned indirect business costs, such as rent and rates that are

considered a qualifying cost by Revenue whereas over time other costs such as maintenance have become

non qualifying as a results of a change in Revenue’s position. Adopting the approach of RD&I grants where

an uplift on qualifying staff costs of 30% is allowed to cover overheads would reduce this area of contention

on what does and doesn’t qualify whilst acknowledging that there are additional costs in undertaking R&D

which need to be supported.

In our response to answers (vii) and (viii) above, it is highlighted that companies often observe differences

between the legislation and Revenue’s interpretation within their guidelines. These differences are not limited

to a consistent interpretation of the law within Revenue as we have found that different offices and inspectors

may apply different interpretations in audits resulting in a variation of allowable expenditure. Given the scale

of the tax credit and the importance to so many companies, developing a centralised audit process, would

promote consistency and ensure the same interpretations are applied to all claimants. Appropriate resourcing

would ensure that audits are carried out in a timely manner and would facilitate a pre-approval process that

we have suggested above would also be favourably looked on by claimant companies.

To date, the option to transfer credits to key R&D personnel has been exercised by very few claimants. Whilst

an innovative concept, in our view the circumstances to make this an attractive option for the employee and

company are limited. These include the effective delay in being able to avail of the transferred credits and

the limits to how much benefit can be received in any one year. In addition, large companies may have too

many policy barriers in terms of reward and recognition to enable them to transfer credits to some staff who

perform qualifying R&D and not others because their work does not qualify, where the employee may have

little choice with regards to their assignment. SMEs are typically able to be more versatile with respects to

HR policy, but they are less likely to have the financial flexibility to be able to allocate the credits in this

manner. Other factors such as key employees in SMEs may well be incentivised by the receipt of shares

which over time may accumulate and render them non-qualifying for this aspect of the scheme. If the

objective of the scheme was to facilitate the ability to attract and retain highly skilled R&D staff, then this

could be better achieved by providing a more beneficial tax credit that would result in the company being

more able to attract and retain those important R&D employees as the company sees fit. For example,

instead of the option to transfer credits to key employees, a higher rate of tax credit percentage on qualifying

salary expenditure for personnel that perform more than 50% of their time for two consecutive years would

reward companies for employing and retaining highly skilled employees, and enable them to utilise that

additional benefit as they find necessary to attract such staff. In addition providing the facility to offset

credits for salary related expenditure directly against payroll taxes would assist in being able to offset the

pay roll costs more directly.

General comment on the direction you would like to see tax policy in this area develop

Ireland’s tax credit scheme must continue to develop and maintain its place within the best schemes in the

world. The R&D tax credit regime along with the administration, must facilitate companies to benefit and

enable them to re-invest in the R&D process to fuel future growth and prosperity.


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Appendix – Business comments in relation to the R&D tax credit scheme

“A stronger R&D presence in the Irish based operation promotes closer ecosystem ties and builds the

international reputation of our operation”

“Building R&D capacity has opened a new vista of engagement with 3rd level institutions and peer companies”

“Certainty with respect to the application of the regime as well as the future of the tax credit is critically

important.”

[The R&D tax credit has allowed you to] “Sustain jobs” *

“It's hugely important for us whether we get the Tax Credits or not. We must maintain innovation to stay

competitive. But we are not supported in this by the current regime” *

“Given the continuous change in the global tax landscape the R&D tax credit is very important in helping

Ireland compete for new investment and continue the growth of our operations in Ireland.”

“Ireland’s R&D credit regime is a key differentiator for Ireland in its bid for high quality investment

opportunities.”

“It’s a very strong message that the Irish Government supports technology development, and this helps our

ability to upskill and hire top talent to respond to emerging business requirements. It helps the Ireland-

based organisation to continue to attract and sustain critical R&D jobs”

“It’s an important tool and incentive for attracting R&D activities to Ireland. It is a tool that assists bringing

additional projects to Ireland which would not otherwise locate here.”

“As CEO I am reducing the R&D projects within the company due to the onerous nature of reporting required

for the program. I am focusing only on the required rather than a more open approach to R&D which I think

is required in a high tech company. We should be encouraged to take R&D risks. The current program makes

the administration a major feature and deterrent for my R&D team.” *

“R&D is a value driver in our business and the location of where these R&D activities are undertaken is critical

to our underlying business models.”

“Significant reduction in cost base for R&D and reflective of Ireland's commitment to attract R&D and support

functions.”

“Supports linkages with local suppliers and allows us invest significantly in our collaboration with schools and

universities”

“The cost of employment is high in Ireland, compared to other countries, so the R&D is a key factor in

considering whether to allocate investment and R&D here.”

“The credit is critical to maintaining the existing level of R&D activity, as well as ensuring future growth, in

our Ireland operations.”

“The criteria are too tight and therefore despite employing over 1200 people in rural Ireland in a fast moving

consumer foods business it is of zero use to us.” *

“The R&D credit makes Ireland a competitive location for basing our engineering activities despite the higher

labour cost when compared to certain other hubs for industry globally”

“The R&D tax credit is a highly visible item to overseas management, which helps to maintain the

competitiveness of the Irish talent base.”


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“The R&D Tax Credit makes Ireland extremely competitive from a cost perspective and additionally supports

our business models.”

“We are a small software company and we were approved for R&D Tax Credits in 2012. In 2013, we were

subject to a Revenue audit. Tax Credits were suspended until finalisation of audit. That took 3 years, so

didn't finalise until 2016. Then the Revenue decided to review our eligibility for tax credits. They suspended

all Tax Credit payment applied for and 3 years later they have still not reaffirmed the status they confirmed

on us in 2012. So we are now due 7 years credits and are now subject to a second audit.”*

“The R&D Tax Credit regime coupled with IDA grants enables Ireland to compete for R&D programs on a

cost basis globally. Without these incentives, our ability to win R&D programs would be significantly

diminished & this would have a significant knock on impact on operations.”

"The R&D tax credit significantly increases the company's scope to pioneer very specific areas in Ireland and

thus enhances not only our company's capability and talent base, it also contributes to Ireland’s future

healthcare landscape in terms of economy and community.”

[The tax credit regime is] “Critical to attract the complex, strategic development projects & has a signifi cant

impact on production pull through”

“Not as business friendly as competitor locations e.g. Singapore. Investment decisions definitely being

influenced by this.”

“Submitting a claim is a daunting task ….. The penalties for making clams that could be deemed as non-

qualifying are very off putting. Sometimes companies are taking the approach, it’s not worth the hassle and

risk”

“One of the factors we can use when determining how we allocate resources in Europe. Important incentive

to our company.”

“The R&D regime has become one of the biggest incentives in helping to locate investment in Ireland.”

“Seen as a key differentiator for investment decisions.”

The comments in this appendix are from the American Chamber of Commerce submission unless marked with

*. The asterisked comments were made directly to Deloitte.


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Documents

Research and Development Tax Credit Public Consultation ......Research and Development Tax Credit | Public Consultation 07 ii) In the absence of the R&D tax credit, what proportion