Rankings are not all that relevant to most startups, except as a bit of useless trivia, since entrepreneurs are hardly going to decide where to start their company based on just one single tax scheme. If you’re interested, the UK is 25th our of 42 for SME support (Germany is last), and India is first. For large companies, the UK is 9th, and Germany again last.
However, a quote in this article is very much worth addressing:
Mariana Mazzucato, professor of science and technology policy at the University of Sussex’s Science Policy Research Unit, told Research Fortnight Today that there is no real evidence that R&D tax credits create innovation that wouldn’t happen anyway.
“If you look at where companies like Pfizer and Glaxo are investing in pharma, they’re not going to places that have R&D tax credit or any sort of tax incentive, but to places where there’s huge amount of public funding,” she says. “And this is true in almost every sector: really innovative companies tend to go where you have higher technological and market opportunities. That often has nothing to do with tax credits.”
This is a very pernicious idea because it’s both true and false.
Our experience is that, because of the way it is structured as a financial incentive, and therefore is recorded towards the effort the finance department rather than the department that actually performs the R&D, this quote is true when it comes to large companies. They don’t invest more in R&D just because of R&D tax credits.
However, this is patently false when it comes to SMEs, particularly tech-intensive startups. There, every penny is immediately reinvested in building the technology that the startup depends on.
Ignoring SMEs in a discussion of the effect of R&D Tax Credits is as short-sighted as ignoring the iPad in studies of so-called “tablet sales”. For every large company that gulps ten million pounds of R&D subsidy and does nothing with it, there are hundreds of SMEs that would reinvest the same amount (divided among them) immediately back into R&D.
Any policy discussion or opinion about R&D Tax Credits must include the SMEs into the picture.