If we take a look beyond our borders, we can see that the countries that invest most heavily in their innovative power are among the most economically successful. Most of the OECD countries and half of the EU member states use funding such as “input promotion” to support their research sectors. For example, France introduced research promotion policies over three decades ago. So did the Netherlands more than 20 years ago. Ireland as well as Norway, which cooperates closely with the EU, have been promoting research through tax incentives in their respective economic systems for almost 15 years.

These investments are paying off. Six years ago Austria restructured its tax-incentive system, which it had introduced in 1988. Since then, its gross domestic expenditure for R&D has grown significantly compared to its national income. This instrument has also had positive effects on Austria’s national budget. The payroll taxes of the scientists additionally hired by companies can in themselves cover almost half of the costs of Austria’s research funding. Offsetting against the payroll tax has a direct effect on the cash flow.

In Germany, it’s not only the domestic companies that are disadvantaged by the lack of such instruments. The German branches of foreign companies are also negatively affected, because they are at a disadvantage when they compete with branches in other countries for corporate research projects. In the long run, this is a burden on Germany’s economy as a whole.

Let’s not close our eyes to the fact that the relative weights within the global economy are rapidly shifting, especially to the advantage of Asian countries, which are attracting research and development activities—and more—by offering sizable tax advantages. In Germany, the focus of the political debate concerning tax incentives for R&D is not so much on the competition for real investments but rather on accusations that multinationally operating companies are avoiding taxes.

Of course it’s legitimate to ask whether German industry even needs tax incentives, in view of its economic success. After all, it also reliably produces and delivers innovations on the basis of its own economic strength. However, general tax benefits are playing a growing role in the global competition between countries to attract companies. We can see that if we simply look at the drastic reduction of corporate taxes in the USA.

Germany cannot completely withdraw from this global competition, especially in the future-oriented area of R&D. That’s because research and development, as well as intangible assets such as patents and trademark rights, play an outstanding role in the world’s increasingly knowledge-based national economies. It’s high time for a change! Germany should no longer be handicapping itself with its taxation policy when innovative companies are looking for new locations to set up shop and invest their capital.

That’s why I challenge the German federal government to use tax reform to lay the foundation for an even playing field where we can operate at eye level with our neighboring countries and trade partners. Germany’s passive and cautious behavior must end. Above all, we need tax incentives for research, right now, and they must be available to all companies and all technologies.

The goal must be a general tax credit for R&D expenditures for all research-based companies, and this tax credit must include expenditures for commissioned research. It must also be independent of the size of the company, because small and medium-sized companies are just as relevant to innovation as major industrial groups. In many cases, the latter are the system leaders in innovation partnerships and the principal clients commissioning research from small and medium-sized companies.