Taxation and Research Expenditure

Abstract

A FEATURE of recent reports on industrial research has been the emphasis which has been placed on the influence taxation is capable of exerting upon research expendíture. The Federation of British Industries, for example, has advanced the principle that all expenditure on research and development should be chargeable against revenue, either immediately or over the commercial life of any asset created. This principle was strongly endorsed by the Industrial Research Committee of the Federation, which in its report last autumn referred to the deterrent effect on the expansion of research of any narrow interpretation of what is allowable expenditure for taxation purposes. The London Chamber of Commerce, expressing its agreement with this view, urged further that the cost of pilot plant, as well as of laboratory buildings and equipment, should be made chargeable against equipment. The question has been further examined by the Parliamentary and Scientific Committee, which in a memorandum on Taxation and Research examined the present position and instanced some of the defects of the present system. This memorandum was based on the ideas first that in modern conditions no industry can maintain its competitive position unless it devotes adequate effort and money to scientific and industrial research. This applies with special force to British industry, having regard to the conditions and tasks which will confront it after the War. Secondly, the money required for such research will be substantially greater than in the past. Again, judged by standards in other industrial countries, and quite apart from its own exceptional needs, British industry has in the past devoted far too little effort and money to scientific and industrial research; and lastly, an increase in the productivity of labour, which is one of the main consequences of industrial research, is a vitally important factor in making possible an improvement in wages and social services. The recent debate in the House of Commons on Government provision for research showed that these ideas are widely shared.