Global auditors cast doubt over Government-cited report

Auditing firms have rejected the Government’s claim its R&D tax credit system will make Australia a leader in boosting research and development.

The KPMG Competitive Alternatives 2010 Special Report: Focus on Tax report claimed the Government’s proposed changes to the system would make it the number one country in the world for fostering research and development.

Innovation Minister, Senator Kim Carr, used the report as vindication for his embattled reform of the R&D Tax Concession program, which initially caused uproar from the software industry before a dramatic backflip by the Government.

But KPMG’s national lead partner for R&D Incentives, David Gelb, could not confirm if any Australians were involved in writing the report and said it was completed before the government submitted its controversial drafts, which were entirely different to industry expectations.

“That report was not at all based on the first or the second exposure draft,” he said. “The report was predicated on there being no change to the definition of R&D.

“There are some key issues that have yet to be resolved.”

Other major auditing firms were quick to reject the idea of Australia taking the top spot.

Deloitte R&D tax and incentives group director, Jason Crawford, said the report and its use by the Government was premature. He said the industry was still up in arms about the issue.

“Australia won’t be the best because although the benefits are quite good, the eligibility criteria are a lot stricter,” he said. “Foreign companies are going to second guess whether or not to land in Australia and local companies with a global footprint are going to consider moving operations offshore.

“The Government’s looked at where the large claims are being made, focussed on the cost to revenue, and unfortunately by trying to bring in a blanket policy, they’re going to disadvantage a lot of companies.”

Michael Johnson Associates managing director, Kris Gale, accused the Government of producing spin.

“The whole thing has been incredibly rushed and sloppy,” he said. “We identified in excess of 15 errors in the explanatory memorandum in its references to the memorandum.

“The system needs to change but we can’t support this reform.”

Shadow Innovation, Industry, Science and Research Minister, Sophie Mirabella, re-confirmed the Coalition will vote against it regardless of Government changes.

“Labor’s proposed changes have resulted in great uncertainty and confusion. This is a desperate Government rushing the changes through before business actually knows their full extent,” she said in a statement.

The tax concession scheme currently costs taxpayers $1.4 billion every year. It encourages research and development by rewarding companies that take part, but the Government has proposed restricting the definition of R&D.

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