The Government-Industry Task Team to look into the Research and Development (R&D) Tax Incentive kicked off its work on Friday 27 November 2015. The task team was established by the Minister of Science and Technology, Naledi Pandor, following her meeting with the private sector on 21 August 2015, which raised important issues about how the incentive can be enhanced to achieve its aims.
This is part of a series of engagements that the Department of Science and Technology (DST) has planned to have with the private sector on ways to increase R&D and innovation in the country.
The Task Team comprises seventeen representatives of key stakeholder groups, namely R&D-performing companies from different sectors, consulting firms, relevant government departments and agencies, as well as academia and the policy research community.
It is chaired by Prof. Anastassios Pouris. Private sector members are Ms Charlotte van Alphen, Mr Dov Paluch, Mr Khaya Mjo, Mr Mohammed Jada, Mr Newton Cockcroft, Ms Nicola Lister, Mr Thomas Smyth and Ms Tosca Dos Santos. Government members are Mr Andrew Wes, Dr Kerry Faul, Dr Sibongile Gumbi, Mr Imraan Patel and Ms Londiwe Khoza. Policy research community members are Ms Claire Busetti, Prof. Jan Eloff and Ms Zanele Monnakgotla.
As background, companies undertaking scientific and technological in South Africa qualify for a tax deduction in terms of section 11D of the Income Tax Act (1962), as amended. The objective of the R&D Tax Incentive is to promote private sector R&D in South Africa.
Since 2006, the incentive has been offering 150% deduction incurred on qualifying R&Dexpenditure. The incentive can be accessed by companies of any size and across all industry sectors. To be eligible for the incentive, a company must submit an application for pre-approval by the Minister of Science and Technology. The pre-approval requirement was introduced on 1 October 2012 to address challenges experienced with the previous approach, which enabled companies to claim retrospectively.
R&D tax incentives have become a popular policy instrument globally over the past two decades. Increasingly, countries have introduced such incentives in order to encourage R&D investment. For South Africa, an incentive of this nature is crucial, both to inspire private sector R&D, which is yet to fully recover following the 2008 to 2010 economic crisis.
At its first sitting on 27 November 2015, the Task Team discussed ways to simplify the process of accessing the incentive, the pre-approval process, clarifying the eligibility criteria and information requirements, issues impacting on the eligibility of software development activities, the process of claiming the tax deduction, options for improving access by small and medium enterprises (SMEs) and ways to improve the coherence of available incentives, as well as ways to improve turnaround times.
It was also noted that other jurisdictions that administer R&D tax incentives experience similar issues, and they review the effectiveness of their processes from time to time to ensure that the incentives remain effective in achieving their purpose.
The next Task Team sitting will be in the last week of January in 2016. It is envisaged that the work of the Task Team will be concluded by March 2016, when it will present its recommendations to the Minister.
