What there was was another round of sweating the R&D tax incentive – the largest single source of innovation and commercialisation funding in the budget – down to size.
This year’s budget sweats another $1.35 billion out of the measure over the four budget years, on top of the $2.9 billion wrung out of R&D in last year’s budget.
That isn’t necessarily a bad thing. When former Innovation Science Australia chair Bill Ferris, former Treasury boss John Fraser and Chief Scientist Alan Finkel looked into the measure, they found that it was too easy for large companies to rort for incremental innovation in software, paint or mine design.
They recommended that eligibility be limited to companies whose spending on R&D exceeded an “intensity” – or percentage of sales – threshold, and that the amount of the discount be changed to a sliding scale.
Large companies with low R&D intensity objected and the government has dragged its feet on the changes. Whether through tighter administration, or a reduction in claims or both, the government has saved more than $4 billion on the R&D tax incentive over the four year budget window.
What the government has not done is to implement the second leg of the Ferris/Finkel/Fraser review – to redirect the savings into direct grants which are used to good effect in countries with stellar innovation records in comparison to Australia, such as Israel, Sweden and the UK. A relatively stingy $60 million was added to Export Market Development Grants.
Start-ups are entitled to be miffed. Turnbull backed innovation because he felt Australia needed a third engine of growth in case finance or mining commodities failed us, especially as we enter an era when many old jobs are being automated and more new jobs are expected to be created in new, high tech industries.
That need hasn’t gone away with the innovation agenda, and it will take a new government to revive it.
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