American Chamber has excellent access to Irish and European public policy networks, opinion leaders and leading media commentators. Through participation in Working Groups and contributions to submissions for Government, the Chamber keeps Irish decision makers focussed on the factors contributing to the continued attractiveness of Ireland as a location for foreign direct investment. More about the Chamber

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Pre Budget Submission 2009


American Chamber of Commerce Ireland

Submission to the

Department of Finance


2009 Budget Recommendations



With over 580 US companies employing over 100,000 people directly, it is estimated that a further 225,000 jobs are directly supported by US companies based in Ireland. The contribution these companies make to the Revenues of the State in terms of corporation tax, PAYE, Vat and other taxes is considerable.

US foreign direct investment has been a diver of innovation and research in the private sector. It contributes and supports Ireland's dynamic enterprise infrastructure through the transfer of technology & commercial know-how, skills development, and the injection of an ethos of change, innovation, continuous learning and a global perspective into working life.

Total US investment in Ireland is $87 billion[1].  Continued investment is crucial to Ireland's current and future success, both as an investor and a significant trading partner. Ireland continues to face increasing competition from other economies for this investment.  

The American Chamber of Commerce continues to work with its members to identify how, in the light of our rising cost base & knowledge based competition, Ireland can implement innovative policies and initiatives which will help us to remain an attractive location for foreign direct investment.

American Chamber of Commerce Ireland

6 Wilton Place

Dublin 2

Telephone: +353 1 661 6201

Contact : Brian Cotter, Government Affairs Manager ,    



Taking Decisions to Position Ireland Positively for the Next Global Economic Upturn

The American Chamber is calling on the Government to deliver measures in its 2009 Budget which will regain control of the public finances, increase productivity in the public sector and continue to invest in critical infrastructure projects to sustain confidence among the investment and business community in Ireland's ability to meet the current economic challenges

In the next decade the foundation for Ireland's growth will be underpinned by educating its people to the highest standards, maintaining an agile and productive labour market adaptable to the needs of enterprise in a cost competitive and low tax economy

In its submission to the Government's Commission on Taxation, the American Chamber emphasises that the Irish taxation system must be optimised to support competitiveness and growth.   As a key driver of competitiveness, the Irish government must preserve control over Ireland's taxation affairs within the EU and retain its 12.5% rate for Corporation Tax.

This pre-budget submission concentrates on the key measures required to improve Ireland's tax competitiveness in a challenging global economy and compete with locations such as Switzerland, Singapore, Luxembourg, etc for inward investment.  These are essential in order to retain existing investment and enable Ireland to compete internationally to attract new foreign direct investment. Our proposals present opportunities to facilitate increased productivity and generate additional Irish tax revenues.


In the knowledge economy, a tax efficient regime for intellectual property, the key mobile profit driver, is vital.  The Irish tax system has a number of features that militate against Ireland being the optimal location for IP development, management and exploitation.  In light of this, we have focused on a number of key areas for reform, namely:

  • Tax write-off for acquired IP,
  • Withholding taxes on outbound royalty payments,
  • Double tax relief for inbound royalty withholding taxes, and
  • Research and development tax credit.

Tax write-off for acquired IP

This is essential to make Ireland more attractive as a centre for the development, management and exploitation of IP.  Ireland is significantly behind competing FDI jurisdictions as Irish tax laws do not (with certain exceptions) provide a tax deduction for the cost of acquiring intellectual property.  We, therefore, propose that serious consideration be given to the introduction of a tax relief system that allows IP acquisition costs to be deducted from resulting royalty streams to put us on a par with our competing FDI jurisdictions.

Withholding tax on outbound royalty payments

In many cases, outbound royalty payments (e.g. non-patent royalties) do not suffer Irish withholding tax, adding to Ireland's attraction as a location in which to base IP licensing and exploitation functions.  This position could be significantly improved by the abolition of withholding tax on patent royalties, thus placing Ireland on a more equal footing with our key competitors.

Double tax relief on inbound royalties

Under the current double tax relief system, limitations on relief for foreign withholding taxes can result in tax rates in excess of 100% on royalty profit margins.  To make Ireland competitive in this critical area, we recommend amending these tax rules to improve the measure of double tax relief attaching to inbound royalties.  Such improvements could include relief for non-treaty royalty withholding taxes and pooling & carry forward of excess foreign royalty withholding taxes. 

Research and development (R&D)

There is widespread consensus that the R&D tax credit regime introduced a number of years ago is not having the desired impact in terms of attracting new inward investment and retaining existing investment.  The following proposals were included in a submission to the Department of Finance, Central Expenditure Evaluation Unit (August 2008)


On balance, we are of the view that a mixed package of incentives is required to increase the profile of Ireland as an R&D location. The regime needs to be as flexible as possible and should be reviewed in the wider context of establishing Ireland as the jurisdiction of choice for the location, creation and trading of intellectual property by US MNCs.

The R&D tax credit should also be focussed on helping to retain existing investment in Ireland. A "transportable" credit capable of being set off against either corporation or payroll taxes, as well as potentially generating cash payments in certain circumstances, would be a welcome initiative in this regard. This would also encourage domestic industry and not just US MNCs

Summary of Key R&D Tax Enhancements

1. PAYE / PRSI Credit

Consideration should be given to influencing key R&D decision makers (Project Leaders, etc.) by reducing the project costs through converting the credit from a corporate tax set off to a payroll setoff (PAYE/PRSI). Alternatively a more focussed approach could be adopted by ring fencing this feature to PHD students, etc. undertaking corporate R&D activities.

2. Start Up Companies

The credit is of very little benefit to companies in start up situations that are loss making and have no corporate tax liability at the current time and for the foreseeable future. A cash refund mechanism akin to other competing jurisdictions, such as the UK, would encourage these start ups to invest in R&D in Ireland.

3. Volume Based System

In order to recognise the long term nature of R&D investment projects it would be beneficial to move from the current incremental system to a volume based system. This would increase the certainty of the tax credit from a business perspective and deliver improvements in the regime as follows:

  • Allow companies to be forward looking in terms of winning new R&D projects and not be penalised for any significant prior investment. Effectively each new project won should be seen as incremental in nature. 
  • Benefit companies with sustained research activity and to facilitate those that may be forced to reduce expenditure levels in more restrictive economic conditions
  • Reduce the administration and compliance costs of the incremental system

4. Rate of Credit

Due to the low Irish corporate tax rate (12.5%) the benefit of the tax credit is diluted when compared to other competing jurisdictions. Therefore there is merit in considering increasing the rate of the credit either across the board or in selective areas / sectors. This can be considered in conjunction with promoting collaboration between entities.

5. Qualifying Activities

There is merit in clarifying and expanding the interpretation of what qualifies as R&D activities under the regime particularly in areas of economic importance or potential, such as financial services, software development and the life sciences.

6. Individual Level

Displaced Income

The key attraction to any R&D regime is the availability of talent. To promote the uptake of fourth level education and to offset the salary sacrifice that this entails, it would be beneficial to consider introducing an element of tax relief for such individuals. This could be structured to assist locking the individuals in to the Irish system. (see also : Upskilling p11 )



Non-IP related tax regime proposals to enhance competitiveness.

Skilled Migrant Workers

As is evident from recent controversy in the UK, the ability of countries to attract (or at least not deter) highly skilled migrant workers is a significant component in economic development. While Irish personal tax rates are comparable with most other developed countries our infrastructure deficit combined with the high cost of housing acts as a deterrent. As a result key workers tend to favour other jurisdictions (particularly Switzerland) in comparison with Ireland. These individuals are often key influencers in the foreign direct investment decisions of MNCs so that their loss to the Irish economy has major long-term consequences. We urge the Minister to introduce a system of tax relief's targeted at these workers.

Reinstate Employer PRSI Ceiling

Currently there is no ceiling on the amount of PRSI employers must pay in respect of employee salaries/benefits. This has resulted in considerable additional costs for employers. In this challenging time for the Irish economy, we recommend that the ceiling for employers' PRSI be reinstated to minimise the costs associated with maintaining existing employment levels as well as assisting in attracting new inward investment.

VAT on B2C on-line services

The application of the standard rate of VAT at 21% to business to consumer (so called "B2C" services) delivered on line results in a significant competitive disadvantage when compared to jurisdictions such as Luxembourg (15% standard rate and special 3% rate).

The long-term solution to this issue involves changing the VAT rules to apply the VAT rate of the country of consumption. This may take some time to achieve. In the meantime we recommend that a special VAT rate be applied to such services to ensure the competitiveness of Ireland.

Carry Forward of Credits

Finance Act 2007 introduced welcome double tax relief for branch taxes suffered in non-tax treaty countries as well as a system of pooling for branch taxes.  Similarly, Finance Act 2006 introduced pooling provisions for interest withholding taxes.  However, unlike our double tax relief rules for holding companies, no provision for the carry forward of excess branch/withholding tax credits was introduced. We suggest that consideration be given to the introduction of a provision, similar to dividends, allowing the carry forward of excess foreign branch credits and interest withholding tax credits.


Related Party Interest

S.130 (2) (d) (iv) TCA1997 treats related party interest as a non-deductible deemed dividend. While there are exceptions for trading interest and payments to EU companies, this provision continues to frustrate attempts to make Ireland competitive for holding company/headquarters and financing projects, particularly when compared with some of our EU competitors. We propose that the removal of this provision be considered as its existence does not generate tax revenue, rather it results in investments going elsewhereIt is important to measure the outcome of policy in terms of its strategic impact and not just in terms of interest or take up.


Ireland's education system is key to our future success, particularly when one considers that Ireland is one of the few countries in Europe with a growing population.  In 15 years time, this will once again be a key competitive advantage providing this new workforce has the skills required by industry.   


  • As Ireland lags the majority (30th/34) of OECD countries in terms of expenditure on education resulting in larger class sizes and lower levels of IT investment in schools it is the strong recommendation of the American Chamber of Commerce Ireland that expenditure on education should not be curtained in the current budgetary environment.

Expenditure in the 2009 budget should prioritise & encourage

  • a higher proportion of tuition hours being spent on the key skills of maths, science and technology where presently Ireland ranks among the lowest in the OECD.
  • an increase in the number of teachers leading classes in the physical sciences & mathematics at second level who have or who are pursuing a suitable level of qualification to deliver these courses at advanced levels.
  • an increase in the number of schools with access to suitable science laboratory facilities to support engaging experimentation & demonstrations consistent with the current curriculum for sciences.
  • an increase in the number computers per student in schools at all levels.
  • an increase in the number of schools with meaningful access to broadband.
  • consistent with the above points, an increase in the numbers of teachers being trained to use and optimise new & existing (ICT) technology as teaching tools in the classroom and in their management of schoolwork.

In particular, the American Chamber calls on the Government to maintain its commitment to investing €5b in its NDP Schools Modernisation & Development programme.


The American Chamber welcomes the Government's commitment to the National Skills Strategy regarding upskilling 500k people in employment , advancing our participation rate in secondary education to 90% and progressing the rate of third level participation from 55-70% as stated in its ‘Innovation in Ireland' policy statement (June 2008)

In addition to meeting the need to increase high-end skills, and with 60% of today's workforce expected to be working in 2020 and beyond there is a real challenge in stepping up skills through life-long learning.

  • Ireland has yet to address in a meaningful manner the issue of displaced income for those considering a return to education to advance their graduate/post-graduate qualifications in key areas (but especially in sciences, engineering and numerical based disciplines in general) for the economy.
  • The American Chamber has proposed that 30,000 people annually should be encouraged to study for undergraduate and post graduate courses.   To do that a system of tax rebates of up to €50k per annum for a maximum of two years for prescribed  third & fourth level qualifications (based on taxes paid over a min of five years prior to the commencement of study) should be introduced to entice people to invest in their own knowledge capital.

Recognising that adult participation in life-long learning in Ireland is well below the top performers in the EU this is a crucial area where the taxation system can lead dramatic change via innovative tax-credit initiatives.


The Strategy for Science Technology & Innovation (SSTI) is a crucial cornerstone of the knowledge economy that lies under the remit in the Department of Enterprise, Trade and Employment.   The American Chamber believes that the SSTI commitment of €8.2 billion in the NDP over the period 2007-2013 address' some of the most fundamental competitive challenges that Ireland faces in becoming skills & knowledge economy.

  • In the context of the fiscal challenges facing Government this year it would be a serious loss of nerve if there were to be a retreat from either the financial commitment to the SSTI or to the time frame within which it is planned.
  • If the upgrade of existing research infrastructure, the development of new facilities and the creation of sustainable and attractive career paths for researchers (especially those supporting Principal Investigators) is to happen at the appropriate critical-path to match our ambitions, we must make credible long-term expenditure commitments in this arena - especially in the current budgetary climate.

We welcome the Governments decision to conduct a ‘root & branch' review of the expenditure and funding of third level education to ensure that the sector has the sound financial foundation to match the State's ambitions as outlined in the SSTI.


Government must commit to maintaining its investment in key public infrastructure projects which will provide businesses with suitable access to global markets and ensure we are not disadvantaged because of poor transport links.  This is particularly important for businesses operating in the regions outside of Dublin.

  • We must sustain the commitment to the completion by 2010 of the major inter-urban (MIU) road routes linking Dublin with Belfast, Cork, Galway, Limerick and Waterford.
  • The Chamber is actively seeking a commitment to the timely completion of the N5 to support important high value jobs & investments in the Mayo region and the planned Atlantic Road Corridor linking Ireland's key Gateway locations.
  • The NDP's Roads Sub-Programme signalled a commitment to continued upgrade of road links to Northern Ireland. Within that context, the upgrade of the Dublin - Derry road is a priority for US firms in the North West as an important economic artery linking Ireland's fourth largest city with the Dublin region


The price of energy to Irish industry has more than doubled during this decade making it the biggest contributor to the cost base after wages. Ireland's ability to continue retaining and attracting high levels of foreign direct investment is impacted by Ireland's capacity to deliver a secure and sustainable energy supply at a competitive cost.

  • The American Chamber is calling of the Government to introduce special taxation and regulatory measures that directly reduce the cost of gas & electricity to business by 15% (excluding movements driven by the international price of energy commodities) in 2009 in order to move Ireland back towards an EU 15 average for energy prices.
  • The American Chamber is calling for a Government commitment to the inclusion of electricity interconnection with the shortest lead time between Ireland and the UK within the critical infrastructure priorities of the NDP.

Ireland already raises more taxes from Environmental sources (energy, transport, pollution) that the average EU 15 in advance of any consideration of a carbon tax.

While Ireland rightly wants to show leadership in its global responsibilities, we must remember that many jobs depend on investments that compete with jurisdictions that remain outside or opposed to some of the leading international protocols on climate change.

  • To build our competitiveness the American Chamber believes that it is important that any positively motivated carbon or polluter taxes under consideration do not add to the overall burden on overall taxation but rather shifts that burden in order to meet public policy objectives & international commitments.


Ireland's investment in its information, communications and telecommunications infrastructure ranks among the lowest in the EU 15 (Eurostat). Continued investment in Ireland's communications infrastructure is of strategic importance to the FDI community because of its significance in accelerating the productivity and innovation promises of ICT to both business & society. 

  • In this context we welcome the Governments commitments to put the development of a knowledge economy at the heart of the economy by making specific commitments to deploying a national Next Generation Broadband Network (July 2008) by 2010.

[1] Bureau of Economic Analysis (2008) at the US Department of Commerce.