It’s an upside down economy that we live in, that’s for sure.
Yesterday evening, The AFR reported that tax breaks for companies conducting research and development (R&D) had risen by more than anticipated, and the Government is now being urged to reign them in:
The R&D tax incentive scheme was worth $2.5 billion when it was introduced in 2011 but the cost has quickly grown to $3 billion and is forecast reach $3.5 billion in 2017-18. This is despite changes that have already occurred to restrict access to the scheme.
Administration costs are also higher than expected… a powerful review panel has flagged tighter eligibility rules as one way to contain the blowout…
“The actual cost has been significantly more than forecast, largely due to growth in the cost of the refundable component for businesses with a turnover of less than $20 million,” the paper says.
“One alternative approach…would be to be more prescriptive in defining eligible activities in order to more clearly target R&D that leads to spillovers that benefit the economy.”
However, this might make the scheme even more complex, the paper adds…
I am by no means an expert on this issue and cannot comment on whether R&D claims are being rorted.
What I will say is that we should equally ask why negative gearing continues to be unlimited where taxpayers claiming the expenses of property speculation cost the Federal government some $4 billion dollars in FY2013, according to the Grattan Institute?
It’s not like negative gearing provides any public benefit, unlike R&D. To the contrary, it assists in channeling scarce capital into unproductive (mostly established) homes, in turn starving businesses of funding, increasing Australia’s foreign debt (since much of the funds are borrowed from offshore), and forcing-up home prices without alleviating rents.
In short, negative gearing is a complete and utter policy failure, yet you rarely hear a bad word from either of Australia’s major political parties.
What Australia’s policy settings effectively say is “forget innovation and speculate on housing instead”, which is obviously detrimental to Australia’s long-run competitiveness and living standards.
