Export Council backs device maker's tax incentive campaign

Export Council of Australia endorses medical device manufacturer’s tax incentive concept touted to “turn the tide against offshoring”

Export Council backs device maker's tax incentive campaign
Export Council backs exporter's tax incentive campaign

July 23, 2013

The Export Council of Australia
today endorsed a Queensland
medical device manufacturer’s tax incentive concept touted to "turn the tide against offshoring".

Cook Medical Australia Managing Director Barry Thomas (pictured) says his Australian Innovation & Manufacturing incentive (AIM) is designed to provide tax relief to manufacturers.

The Brisbane-based exporter has been leading a campaign to sell his initiative,
high level talks in coming weeks with Shadow Treasurer Joe Hockey and Labor MP Steven Jones, both of whom, he says "have the PM’s ear".

Developed in consultation with the Export Council of Australia and major industry body, AusBiotech, the AIM incentive is based on Thomas’ concept of retaining IP and manufacturing in Australia.

Rather than a direct subsidy, companies would receive an inducement equivalent to 2 percent of sales on locally manufactured products, for which they hold patents or licenses.

The incentive would be offset against a company’s tax bill, thereby linking it directly to commercial success and resulting in no upfront government costs.

Similar models have been introduced in the UK and France.

Thomas, who received an Export Hero award from the Australian Institute of Export in 2012, says the high-dollar and cheap cost of labour elsewhere are obvious challenges for manufacturers throughout Australia.

"But we shouldn’t resign ourselves to an inevitable decline – especially since so many families rely on the sector to put food on their tables," he says.

"What we need is some innovative thinking, and I believe AIM gets us part of the way there."

But Thomas, whose medical device facility in Eight Mile Plains is one of the country’s largest, says his incentive is about more than just jobs.

"Domestic manufacturing is vital, not just because of the families it feeds, but because of the role it plays in innovation – the key driver of global competition," he says.

"Once production is sent offshore, company engineers and scientists no longer engage with the manufacturing process, during which potential improvements to a product are identified.

"Designs cannot be amended correspondingly, and as a result they may be under-designing compared to the competition."

Thomas says AIM represents the logical next step to the existing R&D tax incentive.

"While undoubtedly helpful, the R&D incentive has lost some of its kick, having ‘gone global’ and been introduced in some 27 countries," he says

"The R&D support also does very little to keep manufacturing onshore, stifling the potential for innovation."

National tax partner Helen Fisher will act as a technical go-to person for those leading the campaign and any interested parties keen to understand more about the implications of the Australian Innovation & Manufacturing incentive (AIM).

Competing nations, such as the UK and France have introduced similar versions of the AIM incentive, he so-called ‘Patent Box’, the results of which have been positive.

In the UK, GlaxoSmithKline recently invested over $800m in new operations and took on more than 1000 new staff.

The company has publically confirmed
this was due to the UK government’s "Patent Box" legislation, which came into effect in April 2013.

Investigations into the likely impact of such an incentive are being undertaken by Deloitte.

Currently, manufacturing employs around a million Australians and contributes over $106 billion to GDP, but in the past six years, 106,775 jobs have been lost, and it is anticipated that another 85,660 jobs will go before 2018.

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