Australian Opposition Will Target Tax Cuts At Select Industries

by Mary Swire, Tax-News.com, Hong Kong

03 July 2001

Australia's opposition Labour Party (ALP) wants to make Australia into a Knowledge Nation, and will use selective tax cuts to encourage the growth of key industry sectors.

A report produced by the ALP's Knowledge Nation task-force identifies five main industry sectors at the core of the Knowledge Nation - information and communications technology, biotechnology, environmental management, online education and medical research and exports. These sectors are characterised by their existing strong growth and use of technology, or their potential to be economic powerhouses in the years to come.

Under the report's recommendations, the selected industries would be the beneficiaries of additional research and development tax concessions and "action agendas". Federal Opposition leader, Kim Beazley says a Labor Government could also look at adjusting laws governing superannuation funds to allow them a tax incentive for investing. He says superannuation trustees should be allowed a small percentage of funds to look at some venture capital activity.

Mr Beazley says he would need to win three elections to implement his plans to make Australia a Knowledge Nation. He says the plans are not unaffordable, but would take 10-years to have an impact, and can only be started if the ALP wins the next election.

Other recommendations in the report include include a significant increase in funding for universities. "You're going to see starts made on dealing with the problems in our universities, starts made dealing on the problems in our public schools, starts made dealing with the problems we have now of teachers, particularly maths and science teachers," Mr Beazley said.

Critics of the 'Knowledge Nation' plan said it marked a return to the discredited strategy of "picking winners" popular among interventionist governments in the 1970s and now becoming popular again thanks to theorists like Harvard's Professor Michael Porter. The task force report rejected the notion that it was merely picking winning companies, saying that it was rather a matter of "determining priority industries".

"It's putting in place the system that allows the winners to pick themselves," Mr Beazley said.

The Labor leader added that other countries of similar size to Australia adopted similar strategies. Along with trying to generate an overall increase in Australia's low R&D levels, the rationale behind the industries selected is to promote sectors of the economy where there are "linkages" - where research breakthroughs in one area complement other sectors, and vice versa. It's the synergies and spin-offs of these "clusters" - as Professor Porter calls them - that has propelled the notion of interventionist industry policy back from the fringes of the economic debate.

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