GOVERNMENT MUST GO BACK TO THE DRAWING BOARD ON R&D TAX INCENTIVE

This afternoon the Government-dominated Senate Economics Legislation Committee took the highly unusual step of making a unanimous recommendation to the Senate that it defer the consideration of the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018 pending further refinement.
 
The committee said that on the weight of evidence presented to it, the committee considers that the bill should not proceed until there is further consideration of the R&D tax incentive measures.

The Committee found that the key reform proposed in the Bill, the so-called “intensity test”, was poorly targeted and if implemented would severely disadvantage companies which manufacture and employ in Australia.
 
The evidence to the Committee from manufacturing businesses was overwhelmingly against this “test”.  
 
The Committee recognised that there is a need for the Government to maintain public confidence in the integrity and financial sustainability of the R&D Tax Incentive.
 
R&D promotes business innovation across the economy which creates additionality and spillovers of new knowledge.  
 
There is a need to reform the R&D Tax Incentive to better meet these aims and objectives.
 
The Committee‘s specific recommendations were that:
 

  • the approach to the cap on the refundable portion of the Research and Development (R&D) tax incentive is refined, noting investment decisions already taken; and
  • the formula for R&D intensity is refined, noting inherent differences in R&D intensity across industries and impacts on businesses with large operating costs. 

 
Scott Morrison was the Treasurer in the Turnbull Government and responsible for this Bill, but even his backbench is not going to accept it.  
 
Business research and development spending is falling in Australia – which undermines our innovation and growth. With Scott Morrison, it’s just more of the same Liberal chaos.
 
Minister Andrews needs to explain quickly how she is going to retain the confidence of Australian industry in supporting research and development.
 


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