22 companies and institutions from Baden-Württemberg sign a letter in support of biotech innovations

In a letter of mid-August, Jan Schmidt-Brand, a member of the board of BIO Deutschland, CEO of Heidelberg Pharma AG and chairperson of the association’s Working Group on Finance and Taxation called on the Deputy Minister-President and Minister of Finance and Economics of Baden-Württemberg, Nils Schmid (Social Democratic Party of Germany - SPD) to support innovative small and medium-sized enterprises. The letter was co-signed by 22 biotech companies and institutions from Baden-Württemberg.

The fiscal authorities’ federal and state working group is currently preparing a reform of the legislation on tax loss carry-forward. These regulations are very important for many companies involved in biotechnology and other innovative sectors as the current German tax legislation massively discriminates in particular against funding via venture capital.

The aim of the letter to Nils Schmid is to make the Green/Social Democratic government in Baden-Württemberg aware of this topic and to provide political support to the states’ tax officers in terms of finding an appropriate and innovation-friendly solution.

Parallel to this letter, BIO Deutschland intensified contacts with the federal and state working group, because small and medium-sized enterprises – which make up the majority of biotechnology companies in Germany – invest a large amount of their expenditure in research and development (R&D) and transform scientific discoveries into jobs and economic growth. However, the development of an innovative biotechnological product often takes over ten years. The initial development stages leading to marketability of the products must be financed via several funding rounds, often with new investors who provide equity capital (venture capital  – VC). There is massive discrimination against this form of innovation funding, particularly since the Corporate Tax Reform of 2008. Regulations on dealing with loss carry-forward and minimum taxation have aggravated the already tricky funding situation for innovative small and medium sized enterprises (iSMEs). As a result, the successful inclusion of new investors can lead to loss carry-forward no longer being applicable and thus to a tax burden although the start-up losses have not yet been balanced in the total amount by revenue. iSMEs are thus discriminated against in comparison with large companies, as the latter are always able to set research expenditure directly off against revenue.