Australian scientists say a percentage of company profits should be siphoned off to fund basic research, warning that ¡°intolerable¡± underinvestment by business is threatening living standards.

The Australian Academy of Science has proposed a levy of 0.25 per cent or 0.5 per cent of the pre-tax income of almost 4,000 companies that earn at least A$100 million (?49 million) a year, with a discounted rate for businesses that invest directly in research and development.

The academy estimates that the levy could garner between A$2.14 billion and A$12.84 billion annually, depending on its settings. Within a decade or so, the earnings could seed a A$75 billion future fund capable of distributing some A$3 billion in research grants annually while continuing to grow by about 2 per cent a year.

Alternatively, a ¡°pay-as-you-go¡± model could see funds allocated immediately, roughly doubling Australia¡¯s public expenditure on basic research.

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Chief executive Anna-Maria Arabia said research was crucial to national prosperity. For example, Australia¡¯s world-renowned banking industry had been underpinned by decades of mathematical research into cryptography ¨C the use of codes for secure communication, now threatened by the emergence of quantum computing.

But Australia¡¯s investment in ¡°homegrown R&D¡± was declining by 0.1 per cent of gross domestic product (GDP) every year, and is now about A$33 billion less than the amount required to match average spending levels across Organisation for Economic Co-operation and Development (OECD) countries.

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Arabia said Australian innovation had become too dependent on an ¡°overperforming¡± university sector, with higher education institutions outlaying the equivalent of 0.55 per cent of GDP on R&D ¨C compared with an OECD average of 0.43 per cent ¨C but this expenditure hinged on unreliable income from foreign students. Meanwhile, business spending on R&D had slumped to about 0.9 per cent of GDP, far below the OECD average of 1.99 per cent.

¡°We can¡¯t keep going further behind,¡± she said. ¡°If we don¡¯t continue to replenish the wellspring of innovation, it will dry up. No one is willing to do that at the scale that is necessary.¡±

Arabia acknowledged likely business lobby resistance to a levy, but said proposals to date had ¡°asked the taxpayer to do more. It¡¯s time that businesses come to the party. [We should have] a discussion around trade-offs so that we can work together.¡±

Monash University higher education policy expert Andrew Norton said he was sceptical of the idea. ¡°Australia¡¯s R&D expenditure reflects its industrial structure. I am not confident that the government or the Academy of Science knows better than Australian companies how much they should invest in R&D.¡±

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But Arabia said ¡°a little bit of carrot and a little bit of stick¡± was needed to reverse the business community¡¯s ¡°strikingly low¡± expenditure on research. ¡°We would see greater investment in R&D and all of the positive flow-on effects that has to the economy. Businesses know when they invest in R&D, they innovate and their profits get better.¡±

She said the levy could coexist with the R&D Tax Incentive (RDTI) programme, which provides billions of dollars in tax offsets for companies that undertake research. But she said the government should rethink the RDTI, which compensated companies for research which mostly ¡°would have been done anyway. Multiple reviews have shown that it is not meeting its strategic objectives.¡±

john.ross@timeshighereducation.com