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Ireland to introduce new OECD-compliant tax scheme
[DUBLIN] Ireland on Tuesday announced a low 6.25 per cent corporate tax scheme for intellectual property research as it aims to continue to attract investment after closing the "Double Irish" tax loophole.
The "Knowledge Development Box" will offer a tax incentive on earnings originating from research and development projects carried out in Ireland at half the rate of the headline 12.5 per cent corporate tax rate - already one of Europe's lowest.
"The income that qualifies for the Knowledge Development Box will be subject to a new rate of corporation tax of 6.25 per cent," Finance Minister Michael Noonan told parliament.
Mr Noonan said this would be the first patent box to comply with the Organisation for Economic Co-operation and Development (OECD)'s new plan to close the tax loopholes of multinationals that cost countries more than US$100 billion a year.
Similar patent boxes exist in other countries, most notably in Britain which offers a 10 per cent rate and has been increasingly competing with Ireland for investment from major multinationals.
Ireland is the European base for many major multinationals, including Google, Apple, Microsoft and Facebook.
Dublin has moved in recent years to tighten its corporate tax rules in the wake of prolonged international criticism.
Last year, it announced the phasing out of the "Double Irish" loophole which allowed multinationals to shift profits through Ireland to tax havens.
Finance ministers from the G-20 countries last week approved the OECD's Base Erosion and Profit Shifting project report which aims to tackle the low tax bills of major corporations.
Ireland is also set to introduce new rules to share multinational tax information with other countries following a recommendation in the OECD report.
Earlier Irish Prime Minister Enda Kenny said this was "important in the sense of transparency and accountability."
Meanwhile, Ireland announced on Tuesday tax cuts and spending increases amounting to 1.5 billion euros (S$2.4 billion) in its annual budget for 2016.
Mr Noonan said Ireland's economy is forecast to grow 6.2 per cent this year and 4.3 per cent next year, up from earlier forecasts of 4.0 and 3.8 per cent respectively.
Ahead of next spring's general election, the government is moving to unwind some of the austerity of recent years as the economy is set to grow at the fastest rate in the European Union for a second year in a row.
Mr Noonan said Ireland's public deficit would come in at 2.1 per cent of gross domestic product (GDP) in 2015, well below of an earlier 2.7 per cent forecast and below the EU's 3.0 per cent ceiling.
He also added that government debt would fall to 93 per cent of GDP by the end of 2016, within the eurozone average and some distance from its peak of over 120 per cent in 2012.