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Professor Mariana Mazzucato discusses the role of government in innovation

Professor Mariana Mazzucato discusses the role of government in innovation
Global
28 May 2015

Today at the Taxand Global Conference in Milan Professor Mariana Mazzucato, RM Phillips chair in the Economics of Innovation at Science Policy Research Unit of the University of Sussex, UK, and author of The Entrepreneurial State: debunking public vs. private sector myths spoke with Taxand Global Managing Director Tim Wach about the role of government in the modern, innovative economies. 

Professor Mazzucato reiterated the arguments she makes in her book in which she challenges the broadly held view that government should just “get out of the way” of the private sector, and made the case that the state has often played a facilitative role in the development of new technologies.   

Professor Mazzucato indicated that too often the time frame of private sector investment is too short term, and that private sector investors (including venture capital) is too averse to uncertainty, to undertake truly revolutionary research and development.  Professor Mazzucato reiterated her arguments that often it is government that has developed the most innovative technologies, and used the example of Apple, a widely perceived leader in innovation, outlining how the key technologies built into the iPhone, whether the internet, GPS, the touch-screen display or voice-activated Siri, in fact originated from was government funded initiatives.  It is for this reason that she believes companies should pay their fair share of taxes as they benefit from R&D initiated through public funds.  As governments around the world face increasing fiscal pressures that often translate into pressure to reduce domestic spending on centralised initiatives, companies need to step up and help finance research for future innovations. 


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Taxand's Take

In terms of fiscal policy, Professor Mazzucato indicated that preferential tax measures, such as patent box regimes and enterprise zones, do not increase innovation but only erode tax revenues and that, in fact, corporate taxes are often the only financial return that governments get for the basic research that they conduct or facilitate.  Rather, governments would be far better to eliminate those and other tax preferences and create a more neutral tax system.  

Taxand's Take Author

Tim Wach
Global Managing Director
Global

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