Comment by PeterStuer | Hacker News Reader

Comment by PeterStuer | Hacker News Reader

A large proportion of the so-called public R&D spending is actually backdoor subsidies to company's normal production activities.

Here in the EU there has been a relentless lobbying push by industry to redefine 'Research' to include the higher 'Technology Readiness Levels' [1].

Traditionally 'Research' was deemed to be up to TRL-3, and 'Development' up to TRL-5. The distinctions are important as there are far stricter subsidy percentage limits on public funding of 'Development' then on 'Research'.

Now industry lobbying is trying (successfully) to have everything up to TRL-7 be labeled under 'R&D'. Sad times for the real research in the EU, as overall budgets aren't increased and the higher the TRL, the higher the investments that can now make a claim on the money.

A single car factory production line development subsidy can eat up a region's whole yearly R&D budget if left unchecked. It's not private enterprises aren't already swimming in public money, but this is a further land-grab on public funds.

An example: at the same time VW got fines for diesel-gate in other parts of the world, Belgium (which holds the dubious honor of being both a 'tax heaven' for companies with rates in practice close to 0%, while at the same time being the world record holder for taxing workers pay of around 54%) was cutting VW new deals and funneling VW millions of € in subsidies).

[1]https://en.wikipedia.org/wiki/Technology_readiness_level

This. I can see the Netherlands on 2+% of GDP on the chart as well. The Netherlands indeed grants tax cuts if you do R&D (The law is called "WBSO"), however it totally depends on how you word what you're doing towards the tax authorities. Installing Kubernetes & building Jenkins pipelines? Sorry, that's obviously NOT R&D. Oh wait -- someone hired a company to word it slightly differently. Now you're getting an X million tax cut.

Source: Worked at a company that got a 10M+ tax cut for moving to Microservices & rewriting a fucking frontend in React.

I work for a company mainly based in The Netherlands that gets a ~$400 million USD/yr tax cut through WBSO. Search for "Innoation Box" here: http://ir.bookingholdings.com/node/23191/html

It's definitely a huge benefit, but as far as I know this doesn't subtract from government budgets for basic research in The Netherlands (but maybe I'm wrong).

It's basically a tax benefit the government uses as an incentive to get more knowledge workers into the country and to stimulate that sort of economic activity in general.

Those knowledge workers can also get a flat 30% tax reduction which is applied to their gross wage before other reductions. The end result is that someone earning 100k EUR a year has a net take home pay of 101k EUR.

Source: the tax returns of someone I know who took advantage of this scheme (I could have, only I found out about it too late).

Indeed, but this is unrelated to whether or not their employer participates in "research" via WBSO or any other schema, it's more like the U.S. H1B program, i.e. they've got to try to search for talent domestically (or at least make a show of it), not find it, and then pay above a certain amount for the job.

The rules are much stricter these days and it’s not indefinite. When I left it was 5 years with a possible 5 year extension.

There’s also a lot of luck in the application process. I had colleagues in identical jobs, similar salaries who didn’t get the 30% ruling when I did.

Yeah. I was in the same situation a couple of times: As a tech guy being asked to review the WBSO request drafted by some supposed subsidy expert, who was hired for a couple of days and for good money. These requests always contained utter gibberish. If I could bring some sense into it, but by using as much complex technical jargon and expensive words in it as possible. Otherwise they might conclude that most of it was not R&D. Rubbish. Did it twice, trying to be as honest as possible in the circumstance, but from then on always pressed my moustache (is that an expression in English? I made myself unavailable) when these things did the round again.

How about stopping subsidies to companies altogether? Its not a necessary market mechanism.

Governments are in a competitive market for how business friendly they are. This creates pressure to create beneficial tax and subsidy regimes or risk losing businesses. If a government plays it too strict, multinationals will minimize their operations and local businesses won't be able to compete internationally.

The way I see it, it's really the market at work, doing exactly what markets do. Negotiating a price (tax cuts and subdidies) in exchange for a good or service (business presence hiring staff and causing economic activity).

They could just cut taxes instead.

Those fat governmental hand-outs keep being abused, yet they keep existing. It's almost like someone is gaining a lot from them.

Reply on news.ycombinator.com