The Deputy of Science and Technology of the Presidential Office announced that last year, tax credits amounting to $105 billion were approved for knowledge-based companies, but only $25 billion of this amount was utilized.
According to Iran digital economy annotation, Hossein Afshin, the Deputy of Science, Technology, and Knowledge-Based Economy of the Presidential Office, stated at the second event of the National Network of Research and Development Managers: “According to the Knowledge-Based Production Leap Law, in order to use these tax credits, knowledge-based companies and industry activists must sign cooperation agreements with academic centers. The $25 billion has been allocated based on the signed agreements.”
Under the Knowledge-Based Production Leap Law, expenses incurred by companies for research and development activities are considered as tax credits. Afshin mentioned that the performance of universities in Article 13 has been weak, and for this reason, the office has allowed them to use tax credits by uploading memorandums of understanding in addition to contracts. He added: “Out of the $135 billion allocated as tax credits, only $25 billion has been used. This issue has been communicated to the Tax Administration, and we plan to utilize this credit this year since the cooperation agreements between industries and universities have been accepted.”
Afshin considered the amendment of the Knowledge-Based Production Leap Law a mistake and said: “My request is to not alter the law for now and to let its issues become apparent after a few years of implementation. If the law needs amendments afterward, we can take it to the parliament. I believe 80% of this law is executable now, and 20% needs revision, which we should wait and see during implementation.”
He also pointed out that the working group for monitoring the implementation of the Maximum Use of Domestic Capabilities Law has not been formed for some time and said: “We must ensure the formation of this working group to resolve issues faced by knowledge-based companies. Issues related to customs, currency allocation, and export problems are among the challenges for knowledge-based companies.”
He emphasized the formation of the monitoring working group for the Maximum Use of Domestic Capabilities Law and said: “If a knowledge-based product is produced in the country, we must ensure import restrictions for it. If restrictions are not imposed, we should prevent the allocation of preferential currency for its import.”
Afshin categorized the inputs of Iran’s innovation ecosystem into three elements and said: “Infrastructure, human resources, and financing are the three main elements for the development of the innovation and technology ecosystem. With appropriate inputs and facilitation by the government, the result will be growth and development.”
He highlighted the importance of financing for companies active in this field as one of the three influential elements in the innovation ecosystem. According to him, this financing should be provided through the Central Innovation and Prosperity Fund and its associated private funds, which need strengthening.
The Deputy of Science and Technology of the Presidential Office noted that indicators for human resources and financing have declined in recent years and said: “We must strengthen the human resources indicators, and we should also question whether our funds have been strengthened in proportion to inflation.”
Regarding the need for increased financial resources for the technology ecosystem, he said: “There are currently 10,000 knowledge-based companies, and this number is expected to reach 30,000 by the end of the Seventh Development Plan. If financial resources are to be distributed, a significant amount will not reach knowledge-based companies. New resources need to be created for this purpose, and one of the ways is the Knowledge-Based Production Leap Law, with tax credits being one part of it.”
He concluded: “Our share in research and development is low, around 0.7% of GDP, with the private sector’s share being 0.3%. In advanced countries, this figure is about 2.5%, and in countries like China and the USA, it is 3.5% of GDP.”
Support for Research and Development in Shaping a Specialized Ecosystem
Mehdi Elyasi, Deputy of Policy and Development at the Deputy of Science, Technology, and Knowledge-Based Economy, discussed the creation of an innovation tradition in research and development: “We aim to create an innovation tradition in research and development. This means continuously incorporating innovation into our products and services to compete under new conditions. In Articles 11 and 13 of the Knowledge-Based Production Leap Law, we have established a network and are working to address issues in firms, infrastructure, and financial resources.”
He Discusses the Need for Innovation Hubs in the Knowledge-Based Economy Ecosystem
He added regarding the need for innovation hubs in the knowledge-based economy ecosystem: “The goal of research and development is to support the creation of a specialized ecosystem. Last year, over $150 billion worth of industrial development projects were uploaded by companies as research and development projects.”
Lack of Clarity in the Mission of the Research and Development Law Challenges the Innovation Fund
Mohammad-Sadegh Khayyatian Yazdi, Chairman of the Innovation and Prosperity Fund, reported an increase in the number of knowledge-based companies from 55 to 200 and said: “In 2021, with the change in the law and the Knowledge-Based Production Leap Law, there were changes in the board of trustees of the fund. In 2022, the fund’s capacities changed. In 2023, alongside increasing the fund’s capital to $42 billion, we provided four categories of services, the most important of which was financing.”
Lack of Clarity in the Mission of the Research and Development Law as a Major Challenge for the Innovation Fund
According to Khayyatian Yazdi, a key challenge for the Innovation and Prosperity Fund is the lack of clarity in the mission of the Research and Development Law. He noted that there is no cohesive strategy in the product and technology market, and external organizational capacities are not being utilized for research and development. He emphasized that the country needs a leap and focus on research and development, which will be achieved with the program of the Vice Presidency.
Regarding the Innovation Fund’s grants, he added: “The grants provided by the Innovation Fund differ from those given to universities because our services must be integrated with knowledge-based companies, and these companies must themselves apply to use the grants. Essentially, we provide grants to knowledge-based companies whose products or activities contribute to solving problems.”
Article 13 of the Seventh Development Plan: Bridging Universities and Industry
Peyman Salehi, Deputy Minister for Research at the Ministry of Science, Research, and Technology, discussed Article 13 of the Knowledge-Based Production Leap Law during the meeting: “Article 13 is a common ground that connects university research with tax credits and the needs of industrial groups. I have held numerous meetings with governors and various industries across provinces, and over 90% of the companies attending these meetings were unaware of Article 13. Any private or public company that enters into a research and development contract with universities or research institutes can benefit from tax credits.”
Clarity on Research and Development Definition: A Major Issue in Utilizing Tax Credits
According to Salehi, the main issue in the 170 projects submitted for utilizing this tax credit has been the lack of clarity on what constitutes acceptable research and development. He stated: “The current activities of companies are not considered research and development; our definition of research needs to be provided so that companies can benefit from it. Repetitive activities are not innovative research and development; topics must be new and presented in the form of proposals.”
Regarding the interaction between universities and the Vice Presidency, he added: “We have established good interactions and have made efforts to ensure that regulations are not complex and bureaucratic. The value of our contracts between the Ministry of Science and industry is around $10 billion. If we can implement Article 13 in just 1% of the required areas, it would add $30 billion to the contracts.”
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