TAOISEACH BRIAN Cowen is finalising an economic recovery plan which will be unveiled in the next few weeks. It will contain a range of tax incentives and grants designed to make Ireland the most attractive place for companies engaged in research and innovation.
Mr Cowen is hoping the plan will have the same positive impact in helping the State out of the economic downturn as the Financial Services Centre had in the late 1980s.
The plan will offer additional incentives to the 12.5 per cent corporate tax rate to lure new companies here, encourage existing multinationals to locate their research divisions in the State and encourage the development of small Irish companies in the area.
Mr Cowen has been working on the plan with Cabinet colleagues and officials from the IDA and Enterprise Ireland as well as officials from Government departments.
Government sources say Mr Cowen wants to reorient Government policy so that Ireland will be well-placed to get on the path to recovery when the downturn ends.
The core of the plan will involve an effort to make Ireland an international capital for research and innovation and the location where such advances are brought to commercial development. Greater incentives will be provided to the significant multinational presence to carry out research and development.
A concerted effort will also be made to create an indigenous research and development sector through the provision of supports for start-up companies.
Speaking at a conference in Trinity College Dublin earlier this week, Mr Cowen stressed the need for Ireland to move up the value chain in attracting investment so that research, development and innovation could be converted into commercialised products and services.
"This will provide a major driver of Ireland's future prosperity. It will create high-quality and well-paid employment. What we must now do is create an economy that combines the features of an attractive home for innovative multinationals while also being a highly-attractive incubation environment for entrepreneurs," he said.
A number of measures in the Finance Bill published yesterday are designed to link into the economic recovery plan. The tax credit regime for research and development has been revamped to improve its attractiveness to companies.
Measures to provide more support for start-up companies in the sector as well as improved tax credits are provided for in the Bill and Minister for Finance Brain Lenihan also said he was committed to looking at the tax treatment of intellectual property in the coming year. The Bill contains a number of changes to the Budget, most of which have already been announced, but Mr Lenihan insisted the changes would be within the budgetary arithmetic.
He said the 3 per cent levy on incomes over €250,000 was designed to raise €60 million to compensate for the change to the 1 per cent income levy announced in the Budget, which now exempts those earning €18,304 or less and will cost the exchequer €60 million.
People aged 65 and over on incomes of up to €20,000 per annum, and €40,000 for a married couple, will be exempt from the levy as will full medical card holders.
The Government will have to cut State spending if the €2 billion extra in taxation to be raised by the Budget does not stabilise the exchequer's finances, Mr Lenihan said.
"I have made it clear that I believe that this is the maximum amount which can be safely taken out of the economy," he added. If the exchequer's position deteriorates further, the Minister warned that the Government's next actions will have "to be on the spending side".
Mr Lenihan also unveiled a new measure that places some curbs on the amount of time Ireland's wealthy tax exiles can spend in the State. While they will still be entitled to live here for 183 days a year the so-called "Cinderella clause" that does not count days if they leave the State by midnight is being abolished.
