The then Enterprise Minister Micheál Martin and Feargal Ó Móráin, Executive Director, Enterprise Ireland presenting Patricia Callan, Director of the Small Firms Association with an Innovation Voucher in July 2007.

According to Big 4 accounting firm KPMG's 2009 R&D survey, a third of businesses in Ireland indicate that they would recruit extra staff given certain changes to the current Research & Development (R&D) tax regime. The survey was released on Wednesday and undertaken in August 2009, among 100 "business leaders" on Ireland’s R&D performance.

The survey was conducted by RedC research and the 100 business leaders were surveyed across a representative sample of Irish business. All business surveyed had a minimum of 10 employees and turnover ranged from less than €1million to in excess of €50m. 43% had turnovers in the range of €5m-€50m. Sectors represented included manufacturing (28%), construction and engineering (18%) and agriculture (13%).

It's not clear if multinationals were excluded as in their case, decisions regarding location of R&D is not generally made in Ireland.

Every business person of course likes tax breaks, including advisers such as KPMG, but how serious is the commitment to recruit extra staff in return for an additional tax credit of 10%? This is particularly pertinent in relation to research where the payback is more uncertain than from other activities.

The result doesn't seem rational to us but it likely beats making wordy submissions to the Minister of Finance in advance of the Budget..

The Research and Development Tax Credit was first introduced in 2004. The tax credit was raised from 20% to 25% in 2008. It allows any company carrying out R&D activities to a 25% credit to the extent that the expenditure incurred in incremental to expenditure carried out in the base year of 2003.

Headline findings include:

• Increasing the current level of tax credits from their present level of 25% to 35% shows "strong job creation potential." 33% of companies say they would employ more staff if the credit was increased - - with little variation between small, medium and large companies.

• More than one in four companies (28%) predicts an upturn in investment if the tax credit was increased.

• 23% of companies believe R&D credits are an important factor in attracting business to Ireland.

• However only 17% of those surveyed had ever claimed R&D tax credits although the incidence of applying for R&D grants is significantly higher at 28%.

Director General of IBEC Danny McCoy said at the launch: “Now that the Lisbon Treaty has been passed, it’s essential that we give maximum focus to those areas which have a positive impact on encouraging business activity. This survey provides valuable insight as to how we can use R&D as a driver of economic growth.”

KPMG Tax Partner Ken Hardy said, “The survey shows that R&D tax credits have real value to the economy – particularly in terms of stimulating employment. However, there is a clear warning in the report that R&D incentives are being underutilised in the battle to tackle economic challenges. Our tax credit regime was in part designed for a pre-recession era and aspects need to be re-examined to avoid the real risk of competitive disadvantage.”

Commenting on the value of the R&D Tax credit scheme, Eamonn Feely, Finance Director at Galway based Hygeia Chemicals said, “We’re an Irish owned company in existence for almost 70 years. It’s absolutely essential that we innovate and develop new products and our experience of the R&D tax credit scheme is that it has been really valuable in generating funds for further investment.”