Hi-tech companies foil smaller firms' grant
Amendment to R&D law aims to reduce royalties paid by small companies that received grants from chief scientist, hike interest rates on loans received by large companies. Pressure from large firms leads to deferral of Knesset vote on matter
The amendment aims to aid small technology companies and startups which received grants from the chief scientist yet might be a burden for large technology companies which received grants as well.
At this stage, it seems that the amendment will come into effect only at the beginning of 2012, rather than on July 1 this year as originally intended.
The amendment cuts royalties paid by 650 small and medium companies to the chief scientist from 3.5% of their revenues to only 3%. Additionally, the classification of small and medium companies will be changed to companies with an annual turnover of less then $60 million instead of its current $100 million.
The funding for this concession is to come from raising interest rates on loans received by large companies – London Interbank Offered Rate (LIBOR) – which is currently below 1%, to 3%.
The arrangement is to apply to some 25 large Israeli enterprises which receive Chief Scientist grants on a regular basis, including Elbit and ECI. It does not apply to large companies that receive grants from the chief scientist to aid in specific projects such as Applied, Verint and Nice.
Although on the Knesset Finance Committee's table since October 2010, the issue was discussed by the committee early this week. Committee chairman, Knesset Member Moshe Gafni (United Torah Judaism) agreed to postpone voting on the amendment upon request by Robert Ilatov (Yisrael Beiteinu), which will probably hold up the amendment's implementation until 2012.
According to Ilatov, large companies should not be harmed just to help the small companies. Joining forces with Ilatov against Gafni are Israel Association of Electronics & Software Industries CEO Shlomo Waxe, representing the large technology companies, and Elbit Systems representative, Emanuel Duek.
Waxe told Calcalist that "for the past decade, the Ministry of Industry, Trade and Labor has been trying to oppress the technology industry. Whoever initiated this proposal will discover it has pitfalls that will harm the small companies as well, such as excessive authority on part of the Ministry of Industry to impose penalties on startup companies which seek to sell assets.
"Technology investments in Europe and the US are considered a bonus and not an interest bearing loan. This decision, such as proposed by the Finance and Industry Ministries might push ECI to relocate to Singapore tomorrow or compel Elbit to develop a product overseas. It is the large technology companies which uphold the industry in Israel."
Elbit Systems responded that "as part of the large electronic industries which employ tens of thousands of technology and production workers, also in development areas, and in concert with the Israel Association of Electronics & Software Industries, we presented our stance on the proposed amendment in the aim of upholding the principles which underpin growth in exports, the development of employment in periphery areas, close collaboration with the academia and more."
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