91996E2700

WRITTEN QUESTION E-2700/96 by Karin Riis-Jørgensen (ELDR) to the Commission (15 October 1996)

Subject: Promotion of industrial development in Ireland

The Community support framework for grants from the EU Structural Funds to Ireland for the period 1994-1999 was set at ECU 5,62 billion. Some of this money is used to attract international high-technology firms to the country in the form of ten-year tax breaks or direct financial aid to firms that employ local people. The Industrial Development Agency says that the government gives several thousand ecus for every new job created in Ireland.

Does the Commission not consider that competition is being distorted by the fact that Ireland can give foreign firms opening up there a subsidy of several thousand ecus for every job they create?

Does it intend to change the special rules which enable some countries to levy corporation tax on foreign firms in particular sectors at between 0% and 10%?

Will it explain how the form of direct subsidies referred to above is consistent with the principles governing the Structural Funds?

Will it also state to what extent Ireland uses EU resources in order to provide direct operating subsidies to firms?

Answer given by Mrs Wulf-Mathies on behalf of the Commission (28 November 1996)

All Member States offer assistance to foreign companies considering establishing themselves in the Member State concerned. This assistance takes various forms, such as tax relief or direct aid.

The Commission considers foreign direct investment to be important for the development of the Irish economy and the creation of jobs in Ireland. Part of the aid scheme operated by the Industrial development agency is therefore supported, under the operational programme for industrial development, from the resources of the European regional development fund and the European social fund. A large number of projects is supported annually. All the aid schemes supported by the structural funds comply with Community competition rules.

The tax incentives which are provided are not part of the structural funds. These incentives apply on an erga omnes basis and are thus not focused on specific industrial sectors. As a consequence they are not considered to be state aids in the sense of Articles 92-94 of the EC Treaty.