Senator GEORGE CAMPBELL (1:17 PM) —I rise to make a number of comments in relation to the Industry Research and Development Amendment Bill 1998 and to indicate that the Labor Party supports the bill. The bill arose out of a number of issues raised by Labor Party senators in Senate estimates over the past 12 to 18 months. They drew attention to the fact that a number of companies had been serious ly disadvantaged by the rigid application of the then terms of the bill to a number of companies. One stark example that we had before us was a particular company which had sent its application for a tax concession to the tax office and that application laid in the tax office for four or five months before it was discovered and passed on to the Department of Industry, Science and Technology, as it then was. These types of absurdities, at the end of the day, prevented six companies from being considered for the tax concession by the Industrial Research and Development Board. I welcome this bill and the fact that these companies will now be able to have their applications considered by the board. I just hope that the proposals from these companies are still around and that they warrant consideration and the granting by the board of their concessions.

I also draw attention to the comments in the explanatory memorandum. In the first paragraph it says that the bill is aimed at reducing the compliance cost for companies. When I was travelling around the country over the past six months or so for a Senate inquiry, the question of the R&D START program was raised on a number of occasions by representatives of some companies who gave evidence to the inquiry. They said that they had not bothered applying for R&D under the current program because of the rigid, restrictive and very complex administrative provisions that are applied to that program. So, hopefully, the reduction of the compliance cost for companies will open up the opportunity, particularly for small companies, to get access to R&D, because R&D is a critical issue in terms of the development of our industrial base.

We have been trying to promote innovation amongst Australian companies for a considerable time. Over the years, there have been a variety of programs put in place by various successive governments to try to encourage investment in R&D by Australian companies. The reality is that, in the last financial year, we have seen our expenditure on the R&D START program underspent by $50 million. We have also seen that, in terms of the ABS statistics for the year 1996-97, business expenditure on research and development fell by five per cent on the previous year.

Whilst we advocate and praise and encourage innovation, what we are seeing is a fall off in the overall expenditure in R&D by companies in this country. It was argued at the last Senate estimates committee hearing that this was partly because of the huge blow-out that occurred under the scheme introduced by the previous government. This indicates a change in the level of out-take was taking place. I suppose we will have to wait and see at the outcome of the budget whether or not that is factual or whether there is a continuing trend in the reduction of expenditure on R&D in this country. There is certainly a lot of anecdotal evidence around to suggest that companies are not spending anywhere near what they were previously on R&D programs within their corporations. It is a continuing concern to ensure that we are continuously monitoring what is occurring in that area and have the continuous ability to finetune government programs to ensure that R&D expenditure is maximised on behalf of companies in this country and, more importantly, to ensure that we get the sorts of innovations and developments that will allow our industries to grow and to be competitive and successful in the international marketplace.

The second issue I want to briefly address is R&D funds themselves. As a result of the Ralph review of business taxation, there has been a lot of speculation in the media in the past two or three weeks that R&D expenditure could be traded off against a 30 per cent company tax. It has been mentioned in a number of articles in newspapers in recent weeks. One in particular was in the Australian Financial Review of 22 March 1999 and it said:

Mr Ralph said the R&D incentive, which allows companies to claim 125 per cent of their R&D expenditure as a tax deduction, could be sacrificed along with accelerated depreciation.

"It's certainly part of the tax incentives and it could go either way," Mr Ralph said at a public seminar in Sydney on Friday.

I want to raise that issue, because I attended the Australian Pharmaceutical Manufacturers Association dinner last night at which the minister for industry was the guest speaker. I understood him to say that that was off the agenda and that there would be no trade-off of R&D expenditure in respect of anything that comes out of the Ralph review of business taxation. I wanted to put that on the record because, if that is not what the minister said, if that is the wrong interpretation of what he said, I invite him to come into this chamber and tell the Australian people that that is the case.

Senator Schacht —Or tell Mr Costello.

Senator GEORGE CAMPBELL —Or tell Mr Costello. I certainly understood him to say and to make it clear that that was not on the agenda, that there would be no trade-off of funds available for R&D investment expenditure against a lower company tax rate. If that is the case, I think we have to welcome that statement.

As I said in my initial remarks, this bill that we have before us is supported by the Australian Labor Party. It does address what were very blatant administrative restrictions in the bill that worked to the disadvantage of a number of companies. Hopefully, the bill will now institute provisions that will allow those companies applications to be properly addressed by the IR&D board. As I said, hopefully those companies are still around and will be able to take advantage of the new provisions that will be provided for by this amendment bill.