Sir, - I refer to the letter from Dr John Donovan (April 10th). The letter commented on the 1996 Finance Bill provision to curtail abuses of the tax relief for patent royalty income by the manufacturing sector.
The relief is not being abolished as Dr Donovan contends; rather it is being refocused on the area for which it was originally intended viz., bona fide research and development. In fact, the 1996 Finance Bill changes will not only encourage the exploitation of genuine R&D by Irish industry hut, by reducing an unnecessary cost to the Exchequer, will benefit taxpayers generally.
The Minister's initiative followed a survey by the Revenue Commissioners which produced clear evidence that the relief has been used as a means of rewarding directors and certain employees in a tax efficient manner without any obvious benefit to the economy from greater R&D activity. The relief was being claimed for minor changes involving little, if any, technical innovation. The Exchequer cost associated with this practice is significant and it would be likely to increase substantially in future years if no action were taken. - Yours, etc.,
Press & Publicity Officer,
Department of Finance,
Upper Merrion Street,
Dublin 2.