Commission ready to write the cheques

Competition Commissioner Kroes: up to member states to take advantage.

On 30 November, the Commission won approval for Framework Programme 7 (FP7) from the European Parliament. Next week, it is expected to get the final nod from the 25 national governments. FP7 is the largest research budget the EU has ever contemplated - a 60 per cent rise in funding from the old multi-year program.

In addition to making a quick start with its own research support, the Commission unveiled two initiatives on Wednesday designed to spur innovation in the 25 member states: a new approach to the distribution of state aid, and fresh thinking on how tax breaks can encourage more investment in research.

The new approach to state aid is designed to encourage national governments to spend more on research, especially projects involving small and medium-sized enterprises (SMEs).

"The framework clearly favours SMEs, because they are more affected by market failures than large companies," the Commission  said.

Tailored aid

The new rules will allow members to "tailor" aid to support research and development projects, as well as help innovative start-up firms, the Commission said. They also aim to promote the emergence of so-called clusters of research-intensive companies, universities and institutes, similar to the cluster around the University of Cambridge, in England.

The new guidelines give a more modern focus on EU state aid, which has traditionally been directed at helping struggling labour intensive industries, rather than fast growing technology sectors.

"Thanks to the Commission's new research and development and innovation framework, member states should find it easier to use state aid to boost private sector R&D and innovation projects," EU Competition Commissioner Neelie Kroes said in a statement. "It is now up to member states to take full advantage of this opportunity," she added.

"This overhaul will ensure that the SMEs' permanent innovation methods will get the attention they deserve, by shifting state aid towards activities closer to European SMEs' business models," said Gerhard Huemer, economic and fiscal policy expert for the European Association of Craft, Small and Medium-Sized Enterprises, in a statement.

Tax incentives

Tax incentives in favour of research and development can boost R&D investments and stimulate job creation and economic growth in Europe, the Commission said on Wednesday after adopting a plan to clarify the legal conditions arising from EU case law and setting out some basic principles and good practices for the design of tax incentives for R&D.

In recent years, tax incentives have grown to become one of the major instruments used by many member states to increase business R&D but no two countries follow the same approach. The diversity of tax schemes has resulted in an increasingly complex landscape for R&D tax treatment in Europe, which the Commission argues is hindering trans-European collaboration.

The Commission offers national governments guidance on the main design options, features and relevant factors that member states may wish to follow when designing or updating their R&D tax incentive schemes. These include ensuring that tax incentives are easily accessible for a broad range of R&D firms, including elements of simplicity as well as low administrative and compliance costs, principles for evaluation of tax incentives and the need for delivery to be timely, efficient and predictable.

The Commission also urged member states to work together when considering the tax treatment of a number of issues of common interest – in particular the funding for large-scale trans-national R&D projects; the growth of young innovative enterprises; the cross-border mobility of researchers and the treatment of philanthropic funding of research.