World's Most Attractive R&D Centres
World's Most Attractive R&D Centres
Twenty Countries Examined to Ascertain the Most Favourable Tax Rate for R&D Investment
Ireland is among the world’s most competitive locations for R&D investment, according to a major study by accounting and consulting firm, Mazars. The firm undertook an evaluation of the cost of global R&D initiatives after tax and other cost incentives in 20 countries.
Of the twenty countries examined, Australia, Canada, France, Ireland, Israel, Netherlands, UK and the USA, who all have attractive R&D tax regimes, were analysed in depth to ascertain the most effective tax rate for companies making R&D investment.
Of the eight countries examined, Israel had the most competitive effective rate at -6% (see table ) whilst Ireland came second with an effective tax rate of 1%. More importantly, Ireland is the most competitive in Europe for R&D, and the most important native English speaking country, and one look at the tax rate in the USA and one can see why Ireland is a very attractive destination for American R&D.
Noel Cunningham, Tax Partner, Mazars says changes introduced on R&D tax credits in recent budgets have greatly enhanced the attractiveness of investing in R&D by both Irish and multinational companies. “A tax computation was completed for each country to determine the after tax cost of a given level of R&D expenditure so as to arrive at an effective tax rate”, Cunningham explains. “Israel and Ireland had the best corporation tax rates at 11.5% and 12.5% respectively. However, Israel’s regime provides for grants of 50% of the R&D investment whereas Ireland provides a tax credit of 25%. This is where Israel leads the rest of the world in terms of supporting R&D investment”.
“IDA Ireland has been successful in attracting R&D investment to Ireland from leading multinationals. So far this year 14 companies have made R&D announcements including IBM investing €66million in its first smarter cities technology centre which will create 200 jobs and a €23 million investment by Analogue Devices in Limerick. Based on our analysis, Ireland should attract continued R&D investments to Ireland”, he said.
According to Cunningham there are also a number of critical non-tax factors which multinationals consider when evaluating a location for R&D investment. These include; the availability of qualified research institutions; the education level of available workforce; the cost and availability of resources, facilities, equipment and materials; the Proximity of the R & D location to the multinational group’s existing operations; a country’s intellectual property (IP) laws regarding ownership and protection of IP and a country’s political stability.
“Ireland rates highly on all of these critical factors, although the government’s failure to meet its Lisbon agenda targets for 3% of GDP to be invested in Research and Development is a cause for concern. Recent media reports have highlighted concerns expressed by Trinity College which forecasts that the numbers of post-doctoral research staff in the university will fall by 67pc, and postgraduate research student numbers by 33pc, in the academic year 2015-16. Clearly without a strong base of indigenous researchers and research facilities our attractiveness as a location for R&D investment will diminish”, he said.
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