The tax-based research promotion scheme is proving to be an ideal instrument for medium-sized industry. Most applications and approvals are for mechanical and plant engineering. Criticism of the alleged lack of demand is therefore misguided and premature.
Innovations must be promoted where they originate – in the companies. Tax incentives for research enable small and medium-sized enterprises, in particular, to keep up their pace of innovation and to survive in global competition. After the first few months since the introduction of this instrument, the VDMA draws a positive interim conclusion: “The tax-based research promotion has been well received:
One in five applications for funding comes from the mechanical and plant engineering sector,
“says Hartmut Rauen, Deputy Managing Director of the VDMA. Taking the manufacturing industry as a whole as a benchmark, one in three applications came from the mechanical engineering sector. The success rate also speaks for itself: more than 80 percent of the projects from the mechanical and plant engineering sector were approved. This value is far above the chances of success with other funding instruments, explains Rauen: “Innovation funding has never been as reliable as the open-topic and unbureaucratic research allowance!”
Companies have four years to apply
Since the legislator has rightly given companies a longer period of four years to familiarize themselves with this instrument and to submit an application, the VDMA believes that the criticism that arose during the Bundestag election campaign is misguided. “Those who are now hastily breaking the baton on tax-based research funding with reference to an alleged lack of demand are either misinformed or interested in technologies continuing to be steered by the state at the helm. But that leads to a technological dead end,” emphasizes Dr. Ralph Wiechers, head of the VDMA tax department. The instrument is new, he says, and companies first have to familiarize themselves with it. For good reason, he says, they have up to four years to apply to the certifying body for a project’s eligibility and then to the tax office for the allowance. “The Corona pandemic was and is an unprecedented feat for many businesses. In this context, applying for the research allowance often had to wait, and it could, thanks to generous application deadlines,” Wiechers explains.
Expansion strengthens Germany as a location for innovation
According to ZEW estimates, for example, doubling the tax base would mean an additional nearly 200 million euros in future funding for mechanical and plant engineering alone.
Response from the Federal Government Allows Industry Comparison for the First Time
The response from the Federal Government to a minor interpellation from the FDP parliamentary group (subject matter 19/31672) shows that as of 30 June 2021, a total of 2417 applications for the granting of a certificate have been received by the certification body. Of these, 491 came from the mechanical and plant engineering sector. The manufacturing sector is followed by electrical engineering/DV with 268, chemicals/pharmaceuticals with 186, and motor vehicles/vehicle parts with 58 applications. Across all branches of industry, the share of positively approved projects has been 83 percent so far, including mechanical engineering. There are relatively few differences between individual company sizes or sectors.
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