///Strong and stable policy vital to R&D spend

Strong and stable policy vital to R&D spend

The AAMC has responded to the recently released Review of the R&D Tax Incentive calling for a greater focus on stability and international tax competitiveness.

“There is a vital need to provide certainty for companies’ long-term planning; continually cutting and changing the Incentive sends an unfortunate signal to companies both here and overseas that the R&D concession is always at risk,” the AAMC submission says.

The AAMC says the characterisation of the incentive as primarily a “cost” to Government, in terms of potential taxation foregone, reveals a problematic mindset within government.

Empirical research shows that countries investing significantly in R&D see better economic outcomes, particularly among SMEs.

[1]

aust-ecport-awards-3At the same time, the evidence on the additionality of R&D tax policy in Australia reveals that incentives lead to at least a doubling of the private sector R&D spend, a point the Review also makes.[2] [3]

“With strong and stable policies, this value could be far higher,” the submission says.

The AAMC urges understanding of the level of international competition for our highly portable knowledge-rich industries.

Stability: The AAMC warns that cutting the rate sends the signal that the R&D incentive is always at risk. Global businesses making long-term investment decisions require a higher degree of continuity and assurance than we have seen to date in our R&D scheme.

International competitiveness: The AAMC strongly supports the objective of lifting the level of business expenditure on R&D and the manufacture of Australian-developed IP here.

The AAMC places primary emphasis on lifting the total quantity of public support for business R&D as the vital impetus, and notes Australia is only mid-range in government backing of business R&D, at 0.15 per cent of GDP.

Unintended impact: The recommendation to introduce an intensity threshold is a cut for all companies, including high R&D intensive companies. These innovating businesses have a disproportionate positive impact on employment and sales in the whole economy.

The Government will release its final response to the Review as part of a broader National Innovation and Science Agenda in early 2017.

The Review panel was chaired by Mr Bill Ferris AC, Chair, Innovation Australia, Dr Alan Finkel AO, Chief Scientist,  and Mr John Fraser, Secretary to the Treasury.

The panel was asked to identify opportunities to improve the effectiveness and integrity of the Incentive programme, including how its focus could be sharpened to encourage additional R&D.

See the full AAMC submission here.

[1] Office of the Chief Economist 2015, Australian Innovation System Report, Australian Government, Canberra, www.industry.gov.au/innovationreport; Office of the Chief Scientist 2014, Science, Technology, Engineering and Mathematics: Australia’s Future. Australian Government, Canberra; The Brookings Institution, America’s Advanced Industries, “What They Are, Where They Are and Why They Matter”, February 2015; among others.

[2] “The Additionality of R&D Tax Policy in Australia”, Centre for Transformative Innovation, Swinburne University of Technology, February 2016.

[3] Review of the R&D Tax Incentive, 4 April 2016, p. 14.

2018-01-09T11:59:06+00:00 November 24th, 2016|

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