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SOCMA calls for greater urgency on US R&D tax credit

By Gareth MacDonald+

20-Sep-2010
Last updated the 21-Sep-2010 at 08:46 GMT

SOCMA CEO predicts reintroduction of rejected permanent R&D tax credit plan and urges Congress to act “sooner rather than later” to support US manufacturers.

Last week, the US Senate voted against a bill that would have made the manufacturing R&D tax credit introduced in 1981 to boost industrial innovation a permanent fixture of the US budget.

Democrats in the chamber rejected the proposal on concerns that last minute Republican efforts to attach it to a small business stimuli plan would delay the latter scheme’s progress ahead of November 2 elections.

So, while the small business bill was subsequently approved, the political manoeuvring that accompanied its passage means that, for the time being at least, R&D focused manufacturers lack clarity on tax provision.

This uncertainty could end up hurting the US pharmaceutical industry and chemical firms that supply it according to Society of Chemical Manufacturers and Affiliates (SOCMA) CEO Lawrence Sloan.

Sloan told in-pharmatechnologist that rejection of the bill “[is] not so much a setback as it is not a step forward. There's uncertainty as to how the R&D tax credit is to be funded and we're concerned that offsetting revenue collections would negatively impact chemical manufacturers.

He explained that chemicals used by the drug industry require considerable R&D investment and suggested that such tax incentives “help companies not only with their bottom lines but also encourage companies to innovate.”

Lack of US support and urgency

Sloan also voiced concerns about the wider impact on the US pharmaceutical and chemical industry’s position in the increasingly innovation-hungry global marketplace.

The US does a poor job compared to Europe and other world regions to support manufacturing R&D. When there is no certainty as to whether a company will be able to rely on this tax credit, research budgets are trimmed back, which can make US companies less competitive as those in countries where R&D is supported.”

And, while Sloan predicted the need to boost innovation in the chemicals sector means the tax plan will be reintroduced, he suggested that: “Congress should act sooner rather than later to support manufacturing.”

There doesn't seem to be any sense of urgency, which is not surprising considering the government can continue operations without an approved budget. Manufacturers, on the other hand don't have that luxury."

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