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AiG calls for the R&D tax Bill to be scrapped
The Australian Industry Group is calling for the R&D tax Bill to be opposed in the Senate where it will be introduced on Tuesday 22 June. The Bill is currently up for debate in the House of Representatives and was read for the second time on Friday. For access to the Bill and to a collection of commentary by various group click on this link to the Resources section of the BioMelbourne Network Website.
Business Innovation will fall if Government R&D Bill Proceeds
21 June, 2010. "The Australian Industry Group has today released a survey that demonstrates that without a doubt the Government’s proposed changes to the R&D tax concession will lead to a significant fall in business research and development in Australia," Australian Industry Group Chief Executive Heather Ridout said.
"In making only minor amendments to its R&D Bill, the Government appears to have lost the opportunity to rethink its approach and remove the severe restrictions on eligibility for the tax incentive.
"While to date, Ai Group has supported elements of the changes to the R&D tax incentive, the Government’s decision to continue with its flawed approach leaves business little choice but to call for the Bill to be opposed in the Senate. While regrettable, this now appears to be the only way to avoid the damage to business research and development that our survey confirms would flow from the Government’s approach.
"Ai Group’s survey, Business R&D, which included large and small businesses from across a range of industries, backs up the strong feedback we have received from across our membership. It points to the clear disconnect between the design of the proposed new R&D tax incentive and the reality of how business R&D is carried out.
"The Government’s approach is based on a narrow conception of R&D as laboratory work and does not adequately recognise the nature of the real innovation process. If implemented it would see a large proportion of existing investment in R&D activities ruled ineligible for the tax incentive.
“According to the Ai Group survey, more than 45% of respondents currently using the R&D tax incentive would reduce their innovation efforts if the Government's proposed changes were implemented. For smaller businesses the outlook is worse with more than 54% expecting to reduce their R&D activities. A further 10% of all businesses remain uncertain of the impact and less than 7% would increase their R&D investments.
“A reduction in R&D would undermine the significant progress business has made over the past decade in boosting expenditure on R&D as a share of GDP. Instead of fostering innovation and business R&D, the Government’s plan will put it into reverse.
“The proposed changes will also be a compliance nightmare. While the existing tax incentive is already rated as having “high” or “very high” compliance costs, under the proposed changes, over two thirds of all respondents and over 70% of smaller businesses anticipate a further increase in their compliance costs.
“We are constantly reminded of the important roles productivity improvements and business innovation. They are critical in helping business improve the way it adapts to the challenges of globalisation, the twospeed economy and our growing demographic pressures. Worryingly, the Government continues to pursue
changes that will undermine business R&D and therefore businesses ability to boost productivity," Mrs Ridout said.
Key Findings:
- 46.2% of all businesses who currently use the tax incentive and 54.5% of smaller businesses expect they would decrease their innovation activities under the proposed credit scheme.
- 84.7% of all respondents and 90.9% of smaller businesses indicated that they would need to reevaluate their 2010-11 R&D plans if the Government’s changes are enacted.
- More than half of respondents believe the current compliance costs are 'high' or 'very high' while some 68.8% believe their compliance costs would increase under the proposed changes.
The survey findings are available at www.aigroup.com.au/policy/reports
Media Enquiries:
Tony Melville - 0419 190 347
