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Knowledge Development Box
The Knowledge Development Box (KDB) policy now being considered by the Department of Finance is proposing to offer preferential effective tax rate(s) to income generated from intellectual property and patents under the premise of nurturing innovation, encouraging companies to locate high-value jobs in Ireland, and promoting economic growth.
Social Justice Ireland accepts that the corporate sector is important for economic growth and employment in Ireland and that Ireland needs a competitive corporate tax offering to develop indigenous businesses and attract foreign direct investment (FDI). We can also see the attractions of putting in place a competitive offering for knowledge-based investment which is related to research and development (R&D) and innovation at a time when growth in OECD
However there has been no study evaluating the cost, distributive impacts or appropriateness of the knowledge development box proposal. In addition, some of the literature finds that patent boxes significantly reduce tax revenue for the government enacting the patent boxes, though there are measurement issues in covering innovation and tax planning. If a decision is made to proceed with the Knowledge Box proposal there needs to be prior evaluation of its costs and benefits. Detailed information should be collected and analyses, an annual report of the KDB should form part of the annual Budget process and there should be regular scrutiny of this area by an Oireachtas Committee. These actions would deepen the analysis of the KDB proposal, ensure it is assessed and evaluated annually. It would also improve the ability of the Oireachtas to regularly review it.