Tech sector reacts to Cowen's Budget
06-12-2007
by Charlie Taylor

Although the tech sector has welcomed the decision to expand the R&D tax credit in the Budget, commentators have criticised Brian Cowen for failing to support innovation.

The Minister for Finance's latest Budget -- which was unveiled on Wednesday -- was meant to restore confidence in the slowing economy but both ICT Ireland and the Irish Software Association (ISA) have criticised it for not going far enough to bolster the tech sector, which is seen by many as the key to boosting the country's economy.

ICT Ireland raised concerns about the lack of extra investment in the teaching and support of science and mathematics at junior and senior levels. The poor performance in these subjects, and lack of interest among students to study science and maths at third level, have emerged as a key concern among industry watchers.

"The Government missed a valuable opportunity to specifically support the teaching of these subjects. Without extra investment and a refocused strategy we will fail to engage and excite our young students and recover our former high levels of achievement," said Kathryn Raleigh, director, ICT Ireland.

While critical of the Government's approach to supporting education, ICT Ireland did applaud the continuance of 2003 as the base year in the R&D tax system. Companies engaging in R&D get tax credits based on any increase they've made on their R&D spending in 2003. The Government has set 2003 as the base year for a further four years, until 2013.

ICT Ireland also welcomed the additional EUR12 million for higher education research, saying this move would help to boost R&D activity in both foreign-owned and indigenous tech firms.

The expansion of the R&D tax credit system was also supported by the ISA. However, it criticised the Government for failing to bolster early-stage software firms.

In its Budget submission, the ISA had called for a range of measures to increase the levels of business expenditure on R&D amongst SMEs, saying that most start-ups can't avail of R&D tax credits because they are not generating income in the early stage of their development.

Speaking on Thursday, the chairman of the ISA, Pat Brazel, said the Budget represents a "missed opportunity" to drive R&D among early-stage tech firms.

Nonetheless, the ISA welcomed the announcement that next year projects involving collaboration between industry and academia would receive significant financial support.

The association also took the opportunity to call for a number of changes to public procurement policy that it said militates against SMEs winning public sector contracts.

In addition to expanding the R&D tax credit scheme, the latest Budget also increased funding for Science, Technology and Innovation programmes by EUR36.8 million in 2008, bringing total expenditure to EUR326.5 million, a move which was welcomed by Minister Cowen's Cabinet colleague, the Minister for Enterprise, Trade and Employment, Micheal Martin.

Minister Martin also said the decision to enhance the R&D tax credit system would send a clear signal to business that the Government is supporting their efforts to develop new products and win new markets.

For his part Fine Gael's spokesperson on Communications, Simon Coveney focused on the broadband sector, criticising the Government over its failure to address the issue of next generation broadband networks.

"The biggest lost opportunity in this Budget is in the area of broadband. The Taoiseach and Ministers have been falling over each other to highlight Ireland's future investment in next generation broadband networks, but the Budget has proved this to be nothing but spin, "said Coveney.

"Lasting damage will be done to Ireland's economic competitiveness if there is no large-scale and immediate investment in next generation networks in order to rejoin the rest of the developed world. We need to frontload dramatic capital investment under the National Development Plan to finance the roll out of an ambitious broadband communications infrastructure with the highest bandwidth speeds in Europe," he warned.