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R&D essential for Australia's competitiveness and economic strength, says Tax Institute

Publication date: 29 May 98 | Source: THE TAX INSTITUTE

Constant changes to the R&D tax concessions have created an uncertainty about the environment in which to undertake R&D in Australia, according to a survey released today by the Victorian R&D Discussion Group (VRDG) of the Taxation Institute of Australia.

According to David Gelb, Chairman of the R&D Discussion Group, many respondents said they had considered taking their R&D operations offshore to escape the increasingly unsupportive and uncertain Australian environment.

"Companies are nervous about the current R&D environment in Australia. Without some stability and direction from the Government, there is little incentive for many companies to invest in R&D projects," Mr Gelb said.

The survey results also showed a clear link between levels of industrial R&D and the competitiveness of Australian industry and thus Australia's overall economic strength.

"The link between continuing economic strength and investment in R&D is clear. If Australia doesn't have strong commitment to R&D expenditure, our competitiveness will suffer and, in the long term, so will our economy," Mr Gelb said.

The survey of large, medium and small sized companies representing all major industry groups was designed to determine the effectiveness of the current regime of government policy and assistance in encouraging and supporting industrial R&D.

The key survey outcomes were:

overwhelming support for the R&D tax concession to be increased to 150%; little support for the R&D START system of grants for R&D; a clear preference for the R&D tax concession over R&D START grants.

"The survey results clearly reflect the significant decline in companies registering for the R&D tax concession. Figures for 1996/97 currently show that 2,917 companies have applied for registration, whereas the figure for 1995/96 was 3,666," Mr Gelb said.

"Companies want the Government to provide broadly-based and accessible support for industrial R&D, which is precisely what the R&D tax concession was intended to do."

"Constant changes, particularly the reduction to 125 per cent, are likely to reduce the incentive for Australian companies to invest in further R&D," he said.

Mr Gelb added that the survey showed that respondents consider the R&D START program to be largely inaccessible, as funding is limited and discretionary. This is compounded by the time and cost involved in submitting grant applications.

The results of the survey are presented in 'Industry Research and Development: Industry Perceptions'.