Academic warns against repeating R&D tax incentive mistakes

Adjusting the tax concession on research and development could have a significant impact on university and industry partnerships, say academics, in what could be a repeat of the 1996 reduction that hit collaboration hard.

The issue is being discussed ahead of the release of a discussion paper by the government’s business tax working group, which was due to be released at the beginning of this month. The Australian reports the working group is considering a cap on deductions for research by companies with turnover of more than $20 million.

“Our current and future prosperity depends on innovation and research,“ Greens MP Adam Bandt said today, joining others including CSIRO chairman Simon McKeon, and Universities Australia chief executive Belinda Robinson, in publicly seeking to warn the government against cutting R&D tax incentives.

“There was an immediate and obvious change in the amount of collaborative research being done by industry and universities following a reduction in the tax concession in the mid-nineties,” said University of Melbourne Laureate Professor Rod Tucker.

In 1996 the government reduced the rate for deductions from 150% to 125%.

“I think it was a great step backwards at the time,” Professor Tucker said. Professor Tucker heads up the Centre for Energy–Efficient Telecommunications, which is a partnership between the University of Melbourne, and Alcatel-Lucent-owned research group Bell Labs.

“My experience is there has been a direct correlation between, not surprisingly, the R&D tax concessions and the amount of interaction between industry and universities.”

In 2010, a Senate Committee inquiry was held into the scheme, finding it too restrictive and complex. In 2011 the R&D Tax Concession, which had offered deductions of up to 125%, was replaced by the R&D Tax Incentive, which offered different levels of tax offsets equivalent to a 150% deduction, depending on the company’s level of turnover.

The current discussion comes amid speculation the government is still looking for ways to fund a cut to the corporate tax rate.

Dr Rod Lamberts, who is deputy director of the Australian National Centre for Public Awareness of Science at the Australian National University, said the discussion sends a message that the government is devaluing research and development.

“I do think it would have a negative affect, but I’m mostly appalled at this type of thinking. R&D does good stuff – it doesn’t always pay off dollar for dollar but once it does it pays off really well, and not just financially,” Dr Lamberts said.

The Conversation

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