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R&D Investment Is Determined by State Stimulus
Greater support from authorities in the shape of grants or tax cuts may lead to increased private investments in research & development (R&D), the fifth edition of Deloitte CE has revealed.
In Romania, more than half of the respondents are planning to increase R&D investments in the following 12-24 months as compared to the previous year while 63% are planning to spend more in the following three to five years. The main drivers that are motivating companies include the new programming period of EU funds (2014 – 2020) that include new R&D subsidies which provide an immediate stimulus for companies to co-finance R&D projects.
“The survey shows once more that well-functioning economies invest a significantly higher percentage of GDP in R&D. The advantage of comparatively cheap labour in Central Europe is to a certain extent negatively offset by the considerably lower expenditure on R&D in the region. We hope that highlighting these issues will encourage state authorities to implement the changes that will further stimulate investment in R&D,” said Tiberiu Negulescu, senior manager Deloitte Romania.
“There are various incentives companies present in Romania may benefit from in order to leverage their R&D investments so as to generate innovation but to our surprise, half of the interviewees were not aware of what these incentives consist of, while others were uncertain of the way they will be evaluated in a potential inspection by tax and other authorities.”
The survey has shown also that a more predictive fiscal environment may attract more investment into R&D both in Romania as well as in the region. A scarcity of qualified and experienced research personnel is also a concern.
Deloitte’s ongoing focus on R&D aims to map the attitudes of companies in Central Europe to investing in R&D. It also helps find out what difficulties companies face in the R&D area, how they protect their know-how and what kind of government support they mostly use.
This edition of the survey is mapping the situation in ten Central European countries: Croatia, the Czech Republic, Estonia, Hungary, Lithuania, Latvia, Poland, Romania, Slovakia and Slovenia. More than 400 respondents took part in the survey during the period November 2015 – February 2016.
Key Findings in Romania
- 37% of the respondents spent between 1% and 5% of their turnover on R&D in 2015 and 22% spent above 5% of their turnover;
- The percentage of companies that reported they had no R&D expenditure in the previous year is lower as compared to the previous survey (29% in 2014 versus 16% in 2015);
- Almost three quarters of the respondents (73%) believe that R&D costs increased the competitiveness of their product/services, similar to last year’s survey (74%);
- A significant percentage of respondents is planning to invest more in R&D activities than the previous year: 51% are planning to spend more in the following 1-2 years and 63% in the following 3-5 years;
- Almost half of the respondents are not familiar with R&D tax incentives and grants: 45% are not familiar with the R&D tax incentives and do not use them; 43% are not familiar with the R&D grants and do not use them;
- Over two thirds of the respondents are cooperating with third parties when carrying out R&D projects.
Regional Key Findings
- Companies are planning a greater increase in their R&D investments over both the next one to two years (45%) and the next three to five years (57%);
- The key drivers that are motivating companies to invest more in R&D include the availability of more types of benefits, enabling them to use a combination of grants, tax deductions and the availability of skilled and experienced researchers;
- Most companies (71%) are continuing to collaborate with third parties, such as universities and research institutes, which is proving beneficial for both parties;
- The main concerns expressed by companies from all surveyed countries include the uncertainties they face when the tax authorities review the subsidies and tax deductions they have used, the uncertainties in identification of R&D activities and a scarcity of qualified and experienced research personnel;
- The highest proportion of companies mostly use a company secrets policy to protect their know-how and intellectual property (69%), followed by patents and utility designs (40%) and trade marks (31%).