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Government R&D package will reduce business R&D: Senate Inquiry told.

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Senator John Cherry Australian Democrats Employment spokesperson

September 6, 2001 MEDIA RELEASE 01/527

Government R&D package will reduce business R&D: Senate Inquiry told

Tax laws brought forward by the Howard Government tightening eligibility for the R&D tax concession at the same time as introducing a 175% ‘premium’ rate will reduce business investment in R&D, a Senate Inquiry has been told today.

Senator John Cherry, Democrat member of the Senate Inquiry, which met in Sydney today, said he was very concerned that the new tax laws would lead to another fall in business R&D spending.

“Business leaders have told us that the tighter eligibility rules, the less general treatment of capital costs and the increased complexity of the rules will lead to many businesses deciding not to bother with R&D,” he said.

“The effect of the law will clearly be the exact opposite of what was intended by last year’s Innovation Summit.

“The Democrats will be assessing the almost universal negative reaction from business to the new R&D tax rules and developing alternatives.

“The current tax concession has failed as business investment in R&D has fallen sharply since the Government last tightened the rules in 1996, with the number of companies accessing the incentive falling by a sixth.

“Democrats’ Leader and Science and Technology spokesperson, Senator Natasha Stott Despoja, has worked hard to highlight the inadequacies of the Government’s eligibility criteria for R&D tax concessions.

“With the tighter new rules proposed by the Government, Australia will be providing significantly less generous assistance to business R&D than countries such as Singapore, Ireland, Canada and the US.

“That can only add to the brain drain of the best and brightest out of Australia.

“Given the evidence presented to this Senate Inquiry, the Democrats believe that the Government must drop its current proposals to restrict access to the R&D tax concession, and develop new rules that truly encourage Australian business to invest in R&D,” he concluded.

For further information: Senator John Cherry 0408 066 105 (Senator Cherry is available from 5pm to 6pm and after 7pm)

Technical information: Bradley Smith 0408 511 261