DST punts tax breaks

By Leon Engelbrecht for Department of Science and Technology
Johannesburg, 27 Aug 2008

The ICT industry is not making sufficient use of a 150% research and development (R&D) tax rebate, says the Department of Science and Technology (DST).

Dimakatso Mokone, the DST's manager for private sector R&D activities, says the uptake and utilisation of the R&D tax incentive is still low, despite being available since late 2006.

"Incentives of this nature tend to grow their popularity over time, as the broader public becomes aware and when more companies note the impact experienced by other companies already benefiting from the programme," Mokone says.

Another obstacle affecting the ICT industry in general and software developers, in particular, is the definition of R&D, Mokone adds.

She adds the DST will use next month's Science Innovation and Technology Exhibition, in Sandton, to popularise the tax break, which derives from section 11(d) of the Income Tax Act.

The DST is working closely with the South African Revenue Service, the Department of Trade and Industry and National Treasury in this regard.

Mokone says despite the low uptake, SA is starting to do better in the R&D spending stakes. SA's gross R&D expenditure expressed as a percentage of gross domestic product is now 0.92%, up from 0.69% in 1997. The current DST objective is 1%.

Countries around the world are increasingly using R&D tax incentives as a method to promote investment in science, technology and innovation.

Nearly all Organisation for Economic Cooperation and Development member countries have some form of incentives for R&D.

Increased investment in science, technology and innovation activities is generally seen as a means towards achieving policy goals of sustained productivity and long-term economic growth.