Germany expert group urges tax breaks for R&D, chems support call

23 February 2011 19:09  [Source: ICIS news]

TORONTO (ICIS)--Germany needs to do more to provide tax incentives that promote research and development (R&D), a government-appointed expert commission said on Wednesday.

The commission, "Expertenkommission Forschung und Innovation" (EFI), said the introduction of tax schemes to promote R&D would create important incentive for firms.

It was regrettable that Chancellor Angela Merkel’s coalition government had not yet delivered on its promise to implement such schemes, it added.

Comparative studies had confirmed repeatedly that tax incentives were highly efficient in raising venture capital for innovative start-ups, it said. Those start-ups could, in turn, make a considerable contribution to economic growth.

The UK, France and the US had much better tax incentives for venture capital than Germany, the commission said.

It also said that Germany's chemical, car and mechanical engineering sectors were mainly responsible for the growth in the country’s R&D spending since the mid-1990s.

In chemicals, Germany had enjoyed for a long time “specialisation advantages,” which, however, had “clearly dwindled” more recently, it added.

Germany’s chemical producers association, Frankfurt-based VCI, said it welcomed EFI’s report.

“The expert commission has given an important signal for Germany in its role as an industrial producer,” said Gerd Romanowski, general manager of VCI’s science, technology and environment portfolio.

“We cannot save when it comes to R&D,” Romanowski said, proceeding to call on Germany’s government to act quickly.

Almost all major industrial countries were successfully promoting R&D through tax rules in order to woo investments, he added.

Germany’s government said EFI’s report was confirmation of its innovation and growth strategy, which had been pursued despite the global economic and financial crisis.

German private and public expenditure on R&D of €66.7bn ($91.4bn) in the 2009 crisis year was about 2.80% of the country’s GDP  – up from a share of 2.68% in 2008 and 2.53% in 2007, Germany’s federal education and research ministry said in a separate statement.

EFI’s full report, with recommendations on how to improve Germany’s tax system, is available, in German, on the commission's website.

($1 = €0.73)

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By: Stefan Baumgarten
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