Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018: Response to the Inquiry by the Senate Economics Legislation Committee

This submission to the Senate Economics Legislation Committee inquiry into the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018 addresses Schedule 1, which amends the Research and Development Tax Incentive (R&DTI). Research Australia supports the R&DTI in its current form and opposes several of the proposed cuts. It maintains that much of the rationale for the Bill no longer holds, since the actual cost of the scheme in 2017–18 was $2.832 billion, about $600 million below the 2016 Review’s forecast, while business expenditure on R&D fell from 1.19% of GDP in 2013–14 to 1.01% in 2015–16, against 2% in the United States and Germany and 3% in Korea. It recommends that the Senate reject the further 1.5 percentage point cut to the refundable offset and reinstate the 45% rate, because early-stage companies paying little or no tax gain nothing from lower company tax rates. It recommends rejection of the $4 million annual cap on refundable claims in the absence of impact data, but supports the exemption of clinical trials from any cap and the Bill’s definition of clinical trial. Drawing on CSL’s submission, it opposes the R&D intensity threshold for the non-refundable offset as a possible incentive to move manufacturing offshore. It also recommends that the Committee consider measures encouraging collaboration with publicly funded research organisations, such as the Review’s unadopted collaboration premium of up to 20%.