Defeat for the Government on one aspect of its deal with the Palmer United Party on changes to the R&D Tax Incentive, but the criticism has not stopped.
In a recent late-night deal, the Government secured PUP support in the Senate for changes to the R&D Tax Incentive that will see a cap on claims applied retrospectively to 1 July last year.
The original proposal under the Tax Laws Amendment (Research and Development) Bill 2013 would have excluded companies with annual turnover above $20 billion from accessing the R&D Tax Incentive. However, in a shock last-minute deal the Government agreed to a PUP amendment that will cap claims at $100 million of expenditure.
The Bill also included a 1.5 per cent cut in the R&D Tax Incentive, which the Senate has rejected. The Government says it remains committed to the legislation's other aspects.
AusBiotech welcomed rejection of the 1.5 per cent cut, but maintained its call for the Government to implement transitional arrangements to assist companies that have already made commitments based on the Bill's original provisions and intent.
CEO Dr Anna Lavelle told BiotechDispatch that: “The abandonment of plans to cut R&D tax Incentive by a further 1.5% in line with a corporate tax rate cut (which has not eventuated) is welcomed as the right thing to do. The unrelenting threat to the R&D Tax Incentive and efforts to trim and cap it is unsettling for an industry that takes many years to develop each treatment, diagnostic, cure and medical device.”
Dr Lavelle said that transitional arrangements are needed to assist companies that were "left in the lurch by the sudden, recent amendment to place a $100 million cap on claims and apply it retrospectively."
"Companies have made commitments based on the program’s provisions and allowed for the 2013 Bill’s original intent before the amendment sent plans awry. The backdating of this latest amendment will cause havoc with planning, create even greater uncertainty and discourage the industry from investing, which needs to be counter balanced,” she said.
While the Government says only 100 companies will be impacted by the change, AusBiotech has pointed to the interdependent nature of R&D, and the fact that many small Australian companies partner with the targeted organisations.
The issue was discussed at Senate Estimates last week, with shadow industry minister Kim Carr questioning officials on the impact of the change, particularly on biotechnology companies like CSL.
A CSL spokesperson told BiotechDispatch that, while there would be no immediate impact on its R&D activities, the new threshold will be taken into account in future investment decisions.
The spokesperson also said that the company was disappointed at the lack of consultation before the Government agreed to the PUP amendment, and that it had expressed its concern in writing.
Senator Carr told BiotechDispatch that, while Labor welcomed defeat of the 1.5 per cent cut, 'When it comes to R&D and the role of Government in creating an environment that's conducive to business investment, this government's policy is clearly a flat-earth approach.
"They just don't understand the environment in which businesses operate. Other countries are fighting tooth and nail to attract investment dollars," he said. "If we just sit back and do nothing we risk sending Australian high-skill high-wage jobs offshore."