In tough times Mr McCreevy has produced tough budgets, in contrast to the reforming tax-reducing budgets of the boom years.

Last year's budget contained several measures with adverse implications for businesses (bank levy, stamp duty, etc). This time around we see several pro-business measures at relatively little cost to the Exchequer. Ireland's attractiveness as an investment location is significantly enhanced.

The inward investment sector has been lobbying for these changes for some time, and will surely be delighted - as I am - to see them. The reason these items are so inexpensive is that present rules act as a disincentive to the activities to which they relate, to the extent that these activities are hardly located in Ireland at all.

The first example of this is the proposal to exempt capital gains on the sale of subsidiaries in the EU and in countries with which Ireland has a tax treaty.

This is intended to encourage international companies to establish their global or European headquarters in Ireland.

At present, Ireland is the only EU country to tax such gains. Consequently, it is very unusual for international groups to hold their subsidiaries through an Irish holding company.

It is impossible to calculate how much investment Ireland loses from the current position. Conversely, almost no tax is lost by exempting the gains. Any tax loss arises in the domestic sector. Excluding the domestic sector would be unacceptable under EU rules, but even here the tax loss is very small.

According to the Minister, the tax cost of this measure is €10 million in a full year.

Strategically, this makes sense. If we want high-quality employment, such as is provided in regional headquarter companies, our present tax rules are a major handicap.

The Minister also announced there will be "related amendments" to extend the scope of double taxation relief on dividends paid by subsidiaries to parent companies. Briefly, the purpose of double taxation relief in these circumstances is to allow the parent company receiving a dividend to take account of the tax paid overseas on the profits from which the dividend was paid.

Because Ireland taxes such dividends at 25 per cent, then as long as the overseas tax rate exceeds 25 per cent, there will be no further tax in Ireland. The relief is confined to subsidiaries resident in tax treaty countries so the overseas tax would normally exceed 25 per cent.

Nonetheless, there are some technical changes required to the rules to ensure no additional Irish tax arises. They may also require a more radical revamp to deal with the situation where an Irish company has a subsidiary that pays tax at less than 25 per cent.

Suppose the Irish holding company in an international group had a Hungarian subsidiary paying tax at 19 per cent and a German subsidiary paying tax at 40 per cent.

If the Hungarian subsidiary paid a dividend to its Irish parent, the dividend would suffer tax in Ireland - effectively 25 per cent minus 19 per cent equals 6 per cent.

Present rules allow the Irish company to deal with this by holding its German and Hungarian subsidiaries through an intermediate holding company in a country that does not tax foreign dividends at all - say Luxembourg. So the German and Hungarian subsidiaries would pay a dividend to Luxembourg, which would not tax the dividends.

Luxembourg would pay a single dividend to Ireland, which would regard it as carrying a blended tax credit of say 30 per cent. No tax would then be payable in Ireland because the dividend had suffered a rate of tax in excess of 25 per cent.

To eliminate the need for the Luxembourg company, the Minister could introduce a system similar to that in the UK, known as "onshore pooling". With this, no additional Irish tax should arise, because the system would allow for the blending of foreign dividends and tax rates.

A second area of change is one that will be of particular interest to the technology sector. Ireland's low tax rate has been key to the attraction of investment in this sector. But one disadvantage of a low tax rate is that it attracts profits, and the profit-making apparatus.

Research and development activities, which are costly, are often located in high-tax countries to maximise the value of tax deductions.

Many countries (including the US and UK) encourage R&D activities by providing for enhanced tax deductions or "credits" for R&D expenditure. Ireland is now to join this group. The relief will only apply to incremental or "new" expenditure, and it cannot apply to outsourced activities.

At least 50,000 of R&D expenditure must be incurred to qualify for the new relief. It will be computed as 20 per cent of "incremental qualifying expenditure on R&D", and this amount will be deducted from the company's corporation tax.

Further details will emerge in the Finance Bill, but on the basis of the Minister's description, it would appear that incremental R&D expenditure will in effect achieve 30 or 32.5 per cent of tax benefit, depending on whether the company is a 10 or 12.5 per cent taxpayer. It is interesting to compare the UK, where a 125 per cent deduction for R&D on a 30 per cent corporation tax rate means that R&D qualifies for 37.5 per cent worth of tax benefits.

The removal of stamp duty on intellectual property is also important in this area. Intellectual property is the product of R&D and other business activities. A 9 per cent cost on transferring such property is a severe disincentive to its creation in Ireland in the first place. Again this exemption is very welcome.

A completely different set of taxpayers will be pleased about the extensions to film relief, BES relief and the various construction-based projects.

Colm Kelly is head of tax and legal services at PricewaterhouseCoopers