Multinational pharmaceutical groups are making a late play to prolong the benefit they take from the “double Irish” tax scheme as the Government prepares moves in the budget to phase out the controversial measure.
The development comes as Minister for Finance Michael Noonan prepares to signal a “significant” overhaul of the wider corporate tax regime in an effort to underpin multinational investment in the State in the wake of the change.
Measures to boost research and development activities are in prospect, as are measures to encourage firms to locate intellectual property in Ireland.
Although Mr Noonan will declare in his speech next Tuesday that the “double Irish” will be phased out over a period of years, there is no settlement yet as to when it would close definitively.
Indications that the Minister is preparing a move to scrap the scheme follow prolonged debate in which resistance emerged in the business community to an early change.
Four years
It is understood the Department of Finance had discussed a period of four years in which existing schemes would be phased out, thereby giving beneficiaries of the scheme time to move to a new structure. The expectation was that big technology firms who use the scheme might find that acceptable.
However, pharmaceutical groups are understood to have indicated that closure after four years would disrupt tax arrangements already in place for drug products. This is in line with industry practice in which business plans match deployment of particular tax schemes with the life-cycle of specific products.
Transition period
At issue now is whether a “transition” of up to seven years is feasible once the “double Irish” is closed to new schemes, possibly as early as next January.
This mechanism, which has drawn international criticism, helps large multinationals with operations here to minimise tax on their profit by exploiting differences between Irish law and the law in offshore jurisdictions.
Although Minister for Jobs Richard Bruton was cautious on the notion of a unilateral Irish move to wind down the scheme, talks between his department and finance are now centred on practical arrangements for the elimination of the scheme.
The corporate tax shake-up is likely to include new rules to allow firms to write off intellectual property costs, including design and development costs for new products and services.
The State would like to move towards a British-style regime, where patent income is put in a separate “patent box” and taxed separately at a lower rate.
