Ed Husic points to “green shoots” in Commonwealth research and development expenditure.
The Industry and Science Minister says $12.6bn is “being injected to support Australian know-how this year.”
Good-o, for those optimistic about the impact of the $3.4bn research and development tax offset, included in the total.
Which does not include public sector research lobbies, who lament that in 2021 they only got 0.39 per cent of GDP with the other 0.12 per cent going being doled out in tax incentives.
There are regular calls for the government to adopt a recommendation from the 2016 Ferris, Finkel, Fraser review of the research and development TI, a 20 per cent of the offset collaboration premium, “for R&D by business in publicly funded research organisations.”
It never happened – the widely respected Three Fs review was not adopted, despite the coalition government’s multiple goes at reform. (The Campus Morning Mail archive includes umpteen yarns about the Three Fs, and Kirsty Abbott (then CQU) scrutinised its effectiveness here.
Supporters of the R&D TI can claim international practise demonstrates it is common policy . According to the OECD, Japan allocates 0.09 per cent of GDP to tax incentives, Korea 0.14 per cent and the UK 0.31 per cent. The US has no specific tax relief for R&D, although small business can qualify for a payroll tax credit for research “that is technological in nature (and) intended for use in developing a new or improved business component of the taxpayer.”
But while support for business R&D is something of an OECD norm, whether the existing Australian model is the best way to fund it appears to be assumed. In 2021 the Australian National Audit Office was okay with government administration of the scheme. And administering agency, Industry innovation and Science Australia’s 2022-23 annual report states that a survey of business users found, “respondents highlighted the benefits of the programme to their companies and the positive impact the programme has on innovation within Australia more broadly.”
It includes a case study of a business whose owner stated, “the company’s early success could not have been achieved without the help of the R&DTI.”
Industry lobby AusBiotech is also keen on the incentive. It commissioned a report from Deloitte’s which estimated year that the biotech sector’s use of the R&D TI added $9.1bn to GDP 2011-2021.
Good-o, but overall national data and proposals for alternative incentives seem scarce. An OECD report measures R&D TI incentives on estimates of ten innovation and economic outcomes but only has Australian results for three.
As the Parliamentary Library puts it, “although there has been a trend amongst OECD countries to increase the availability, simplicity and generosity of R&D tax incentives, there is a lack of clear empirical evidence about their effectiveness in promoting new R&D activity.”
But it does appear clear that when it comes to industry based research the green shoots Mr Husic sees are fertilised by public money – and lots of it.
