I still don’t understand why it has to be RnD? If I made a million dollars and spent a million in salaries, I made no profit. The government shouldn’t be taxing me on no money made. They already get taxes on the salaries I’m giving out.
It's never supposed to be about what's "fair" or what they "should" do. It's about the fact that they want to spend $X, and need to raise $X one way or the other.
In this case, though, it was purely a trick. They were required to balance the budget over the long term, so they spent money now and identified a pot of money they could take from later. They just kicked the can down the road, and now we've arrived where the can landed. They actually don't think it's fair, or reasonable, or productive. But changing it does make somebody responsible for a huge increase in the deficit... and it's the people who spent the money 5 years ago.
This change taxes you on profit you never made, and specifically targets software companies.
It’s insane.
If you made a million dollar and bought a million in patents, you still would have no money but wouldn't expect to be paying 0 tax, would you ? How RnD should be taxed is up for debate, but at least the logic is that it's not a simple cost (in comparison to paying a janitor to clean the office for instance)
I kinda see many cases where a salary isn't as clear cut as a simple cost...for instance comparing two cases:
- we buy for a million dollar an exclusive right on an innovative system from a freelance guy that developed it on his own
- we contract for 10k a month the same guy to design and develop the same innovative system, he takes a year or two to develop it.
In one case it's a purchase of an asset, in the other case it's a salary. The resulting asset is the same though.
But if you make an employment contract with somebody it is totally unknown what is the value you are or will be getting out of the employee. You are not buying an "asset" because you can not own an employee. They can quit any time.
> you can not own an employee.
You own everything the employee produced during the contract, whenever they quit.
Time spent is NOT an asset, it is consumed, hour by the hour. It is an expense.
It is not an asset also because you can not choose to sell it to someone else and thus recoup the money you have placed on it.
You'd be saying you didn't pay for a house, instead you paid an architect to come up with the blueprint and paid the salaries and purchases of a construction team hour by hour for X months to execute on the design, additional work included, until you got a satisfying product. An accountant looking at it afterwards would still tell you you now have an asset estimated at Y thousands on the market.
> you can not choose to sell it to someone else
You can of course sell a developped product or a service to another company. Or even just the research part if it would cost enough to the buyer to reproduce it.
You didn't pay the architect to work on the blueprint, you paid FOR the blueprint.
The blueprint is an asset, architect's time is not. You are not the employer of the architect, you are their client. The business transaction is money-for-blueprint. Whereas with an inhouse software developer the business-transaction is salary-for-time-spent.
If the software developer does not come up with a working program you can not take away their already earned salary. Whereas if the architect does not give you the blueprint you don't have to pay for it.
And once you get the blueprint you can sell it to someone else, it is an asset. Once the SW-developer-employee goes home you might or might not be able to sell their work-products to somebody else, because maybe the program does not run. If it does not run you can not sue the employee. If the architect's blueprints do not produce a working house you can sue them.