Chile hopes tax breaks will help double R&D spend

[SANTIAGO] Chile is set to increase industry’s contribution to research and development (R&D) funding by almost 50 per cent through a new tax incentives law.

The new bill would see private sector contributions rise to 65 per cent of the country’s overall R&D investment — the average for countries of the OECD (Organisation for Economic Co-operation and Development) and up from the current 44 per cent — by 2018.

According to a survey, Chile’s investment in R&D is only 0.4 per cent of gross domestic product (GDP), compared with the 2.3 per cent of GDP average for OECD countries.

The bill, sent to Parliament last week (1 March), "is a key step to reach the government’s goal of doubling the current investment in R&D by 2014", minister of the economy Juan Andrés Fontaine said in a press conference (24 February).

To meet that goal, the new bill intends to replace a law enacted in 2008, which gives companies a tax credit of 35 per cent of their R&D spending.

"Although the current law has been considered an improvement, its restrictions have meant that not many companies have applied for the tax credit," Tomás Flores, deputy minister of the economy, told SciDev.Net.

For example, the current law only provides the benefits if the private company partners with an external research centre or university certified by the Chilean Economic Development Corporation (CORFO), a government agency. This was part of the former government’s effort to boost the relationship between the private and academic sectors.

Also, maximum tax benefits were capped at US$390,000 per year, said Flores.

Between 2008 and 2010, 33 private projects have benefited, with a total state investment through tax benefits of US$5.4 million.

But with the new bill "the government estimates a state investment through these tax incentives will rise to US$23.8 million by 2014 and US$85.2 million by 2018", Flores said.

The new bill reduces the tax credit to 30 per cent, but triples its maximum yearly allowance to US$1.2 million.

Bernardita Araya, head of R&D at Chilean pharmaceutical company CFR Recalcine, said the new law is good news for companies whose research projects are confidential. "We hardly externalise basic research due to the sensitive information involved, and to avoid conflicts about intellectual property, so this bill is progress, since it would cover ‘in house’ projects."

The benefits of the bill also apply to investment in new infrastructure, equipment and protection of intellectual property  — items not covered by the current law.

Inti Núñez, professor of innovation and entrepreneurship at the University Adolfo Ibáñez, welcomed the project as reducing the cost of innovating in the short term but he warned that companies should be responsible and not waste the extra funding.