Science minister hopes cutting red tape will boost uptake
South Africa’s government has reviewed its R&D tax incentives in a hope that simpler application procedures will improve the disappointing level of uptake by firms.
Naledi Pandor, the minister of science and technology, said the revised R&D Tax Incentive Programme would be effective from 1 October. She was speaking at a science and technology conference in Cape Town on 29 August.
Under the new rules, companies claiming for tax rebates no longer need to submit separate forms to the department of science and technology and the South African Revenue Service. Instead, they will need only to submit a single form to the DST before claiming from SARS.
This form will also work as a pre-approval form for companies claiming the rebate, meaning businesses with ineligible claims will not have to waste their time writing to the revenue service.
“Companies will now know upfront whether or not their R&D is eligible for the incentive before they submit a claim to SARS”, a DST spokesman said.
South Africa offers a 150 per cent tax rebate on funding companies’ expenditure on R&D. But the uptake of the rebate, introduced in 2006, has been disappointing.
Small and medium-sized companies in particular struggled to make use of the scheme in its first four years, according to a report the DST produced for parliament in 2010.
The application process has been too onerous, says Brenda Koornneef, an executive at Tiger Brands, which owns Jungle Oats, Oros juices and other South African food brands.
“The process is lengthy and industry doesn’t understand it. There is also of course the lack of knowledge about the existence of incentive itself”, she says.
South Africa has seen a drop in domestic business contributions to the country’s R&D spend. Local industry provided 17 per cent of the country’s R&D in 1997, but only 10 per cent in 2007.
Pandor hopes the revised tax credit scheme will help reverse this development. “We would like to see significant growth in private sector R&D in South Africa and are investigating new incentives and strategies”, she said.