Minister stumbles over R&D Tax Incentive

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The major parties have debated innovation policy with Kim Carr declaring a Labor government would not "smash" an industry it was also trying to build, while minister Christopher Pyne stumbled over the R&D Tax Incentive.

Mr Pyne and Senator Carr debated innovation policy at the National Press Club in Canberra on Monday.

Senator Carr used last year's dispute between the research-based pharmaceutical sector and government as the example of how Labor would not "smash" an industry it was also trying to build.

Mr Pyne stumbled badly at the outset when asked about a billion-dollar cut in the R&D Tax Incentive.

Compare David Speers asked the minister how the Coalition could claim to support innovation while proposing a $1 billion cut in the R&D Tax Incentive. In response, Mr Pyne mistakenly denied any change had or would be made to the popular program.

The Coalition actually announced the cut in the 2014-15 Budget. The proposal, which has faced significant stakeholder and political opposition, remains one of several announced but unlegislated savings measures from that Budget.

The Parliamentary Budget Office recently said it would generate savings of $1.03 billion over the years to 2019-20.

The proposal will reduce the rates of the refundable and non-refundable tax offsets available under the R&D Tax Incentive for the first $100 million of eligible expenditure by 1.5 per cent. The refundable rate will drop from 45 per cent to 43.5 per cent and the non-refundable rate will drop from 40 per cent to 38.5 per cent.

It has failed to navigate the parliamentary approval process with Labor and the Greens combining to defeat the measure. However, while previously describing the cut as "reckless", Labor recently announced its back down as part of its ‘Plan for Budget Repair’.

During yesterday's debate, Mr Pyne maintained the Coalition had not proposed any cut to the program, even when confronted with specifics and confirmation of Labor's back down from Senator Carr.

The minister appeared to eventually recognise his error but, rather than correcting the mistake, Mr Pyne essentially dismissed the proposed cut as a "three-year old measure" that has failed to navigate the Senate. Yet Labor's support means the measure is now certain to win parliamentary approval.

The proposed cut has been widely criticised by the life sciences sector, including AusBiotech.

The Turnbull government announced a review of the R&D Tax Incentive program in December last year as part of the National Innovation and Science Agenda.

The Review is being conducted by Mr Bill Ferris AC, Chair, Innovation and Science Australia, Dr Alan Finkel AO FTSE, Chief Scientist of Australia, and Mr John Fraser, Secretary to the Treasury.