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Cochlear warns on research tax changes

October 19, 2017

Cochlear warns on research tax changes

Sarah-Jane Tasker, The Australian, 17 October 2017

Cochlear’s chairman Rick Holliday-Smith has warned that the global biotech could be forced to move investment offshore under proposed changes to research tax incentives.

Mr Holliday-Smith told his shareholders at today’s annual general meeting that Australia was looking to reduce research and development tax incentives at a time when many other countries appeared to be increasing incentives to attract R & D investment.

He said the changes the government was considering were complex but appeared designed to cap the levels of eligible R & D and introduce a range of qualification variables.

“We note that there are further proposed changes to incentives, which could further materially reduce the R & D tax benefits to Cochlear in Australia,” he said.

Mr Holliday-Smith said the impact of the decision to alter the R & D tax incentives could only be understood over the longer term.

“There may be little or no apparent impact from changes to taxation policy in the first year but over time I fear we will see the loss of an increasing amount of our incremental research investments to overseas jurisdictions,” he said.

Cochlear (COH) spends more than $150 million a year on R & D related activities, which represents 12 per cent of its revenue, with the majority of that activity done in Australia.

The Australian-listed company’s chairman said that while over 95 per cent of its revenue was generated outside Australia, the company paid more than 75 per cent of its taxes in Australia.

He added that the R & D tax incentive was important for globally mobile, export-focused, advanced manufacturing companies like Cochlear.

“These R & D related tax incentives have supported the commercial decisions that allow Cochlear to stay in Australia to the fullest extent possible and conduct the majority of its research in Australia,” he said.

Mr Holliday-Smith said the company’s commitment to R & D in Australia provided a training ground for leaders of the next generation of innovators, especially in the field of medical technology.

“We believe Australia needs global leaders in non-mining export-oriented businesses and we suggest Australia should encourage research-oriented companies like Cochlear, especially ones that are involved in advanced manufacturing and who are globally mobile,” he said.