Tax incentives to encourage Irish R&D?

Private investment in research and development (R&D) activities in Ireland has increased, but further efforts are needed to reach the EU's 3 per cent target, a new report published by the Irish policy and advisory board for enterprise, trade, science, technology and innovation (Forfás), has concluded, reports CORDIS.

The report finds that for the year 2001, the business sector in Ireland spent a total of €917 million on R&D activities, compared to €784 million in 1999. However, despite an increase in expenditure, the report claims that in real terms the average annual growth rate in this area was only 4 per cent per annum for the period 1999 to 2001, compared to nearly 12 per cent per annum for the previous two year period.

The report also finds that the levels of R&D collaboration by firms in 2001, either with other firms or with the public sector research system, was almost the same as those reported in the 1993. The intervening period has not led to any significant increase in cooperative behaviour, particularly with the higher education sector, despite numerous policy initiatives aimed at raising such cooperation.

Speaking at the launch of the report, Martin Cronin, chief executive of Forfás, said that the rate at which the business sector was increasing its investment in R&D activities had to improve in order to place Ireland on a par with other Member States. "EU heads of government have stated that Europe must become the most competitive and dynamic knowledge-based economy in the world. To achieve this goal, a target figure has been set of an average EU investment in R&D of 3 per cent of GDP by 2010, two thirds of which should come from industry,"​ he said. "In the light of this, and the goal that Ireland has set itself of being a competitive and knowledge-based economy, we must ensure that Ireland is a location which is attractive for R&D both in our universities and in industry,"​ added Cronin.

Cronin said that a number of measures could be put in place 'to ensure that the right environment is available' to allow increased numbers of firms to spend significant amounts on R&D and increase the scale of R&D undertaken. One possible initiative is the introduction of R&D tax incentives. "This would ensure that Ireland is not at a competitive disadvantage as a location for R&D and would assist firms prepared to invest significantly in R&D,"​ he claimed.

Furthermore, Cronin argued that greater R&D collaboration in both large companies and small to medium enterprises (SMEs) is needed, as well as a higher degree of cooperation between the education system and the private sector. "The capacity of our indigenous firms to absorb new technologies is of particular importance and their connectedness to the higher education system, which is the major source of new technology for commercialisation, must be facilitated,"​ he added.