Boost Innovation with Patent Tax Reform

5 August 2015

The chorus of corporate voices imploring the Federal Government to review the taxation issues associated with Australian advanced manufacturers and those exploiting Australian developed IP is now too loud to ignore. (‘CSL urges lower manufacturing tax’ and ‘Australian start-ups not doing as well as we think’)

It’s well understood that Australia has a challenging set of economic circumstances, many of which act to hinder the growth and success of manufacturers and those businesses seeking to commercialise the IP they have developed. High corporate tax rates, limited access to start-up capital, high wages, etc drive many businesses to take their IP offshore, to countries that are more attractive and supportive of businesses exploiting IP and advanced manufacturing capabilities (and with such a move goes jobs and taxable profits).

Many western economies are aware of the ability of low tax, low cost economies to attract investment from companies such as CSL and are using preferential tax regimes to keep their manufacturing and IP onshore. The UK, Italy, and half a dozen other advanced economies all have OECD endorsed ‘Patent box’ type tax regimes, offering a lower tax rate to companies that develop and exploit IP in country. Now the US ‘Ways and Means’ Committee has recommended that the US adopt a similar approach.

With all this forward thinking, economic reform taking place to counter the migration of IP and advanced manufacturing to low tax jurisdictions, what is the Australian Government doing? Patent box reform demands serious economic discussion. Otherwise, we risk Australia’s most successful and innovative businesses taking their IP, jobs and profits offshore.