Innovate and reduce tax burden

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Innovate and reduce tax burden

The military-installed government led by prime minister Prayut Chan-ocha has announced plans to offer greater tax privileges to private enterprise and government agencies which buy and use locally invented innovations.

This comes on the heels of the National Science and Technology Development Agency (NSTDA) combining with the Securities and Exchange Commission and other major businesses last year to encourage small and medium-sized businesses to invest a greater portion of their budgets in research and development (R&D) and innovation and to list on the Stock Exchange of Thailand (SET).

The NSTDA expects private sector annual investment in R&D will reach 120 billion baht by 2017, double what it is at present. This will be largely due to the government’s new tax incentives.

These incentives have been relatively sweeping in nature, slashing the tariff on imported equipment for local invented innovations and R&D as well as raising the tax deduction level on R&D from 200 to 300 percent.

Over the last couple of years, 16 small businesses have launched Initial Public Offerings (IPO’s) on the SET in an effort to raise funds for further expansion.

In the public sector, state agencies have been told to set aside 30 percent of their annual profit for R&D as a way of encouraging people to be more innovative and creative.

The Federation of Thai Industries has said the new policies would greatly encourage innovation, certainly among newer enterprises but the new measures should also help to modify the mindset of many in charge of older companies which have continued to import expensive technology and not looked at developing their own in-house innovations.

The Federation chairman said a lot had been spoken about innovation and R&D in recent years, but nothing concrete and substantial had really happened. He said they were happy with the present administration for actually developing a firm policy towards R&D and innovation.

The chairman pointed out that Thailand’s future long-term development as an advanced economy was dependent on funding being made available for innovation and R&D in order for the country to free itself from the middle-income trap. As he noted, there are many countries with populations on what would be termed middle incomes, but they tend to become stuck at that level because of a failure to innovate and therefore gradually fall prey to a weaker competitive advantage.

It was pointed out though, by the CEO of Siam Cement Group, that more money invested in R&D does not necessarily mean a better long-term outcome if the new innovations and discoveries are not properly marketed and turned into a viable commercial product.

Siam Cement Group said it expected to allocate a budget of five billion baht in 2016 for R&D, up from 2.71 billion baht in 2013.  

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