Taxation of R&D: Review of Practices

Abstract

In recent years R&D tax incentives have been characterized by increasing scale and spread on innovation activity. Approaches to integrated R&D tax incentives into recipes for long-term growth and competitiveness were developed and tested in many countries. For example, only 12 OECD members employed R&D tax incentives in 1995, but 27 members do so in 2013 (as well as Brazil, China, India, Russia and other countries). And their share of total government expenditure on R&D (direct and tax) by OECD member countries reached at least a third. These trends have accompanied the development and testing of approaches to estimate the costs of tax support for R&D (including tax expenditures) and its effects and to ensure that they are internationally compatible.As for Russia, there are no officially accepted estimates of the scale and effectiveness of R&D and innovation tax support yet, though efforts to calculate them have been under way since 2010. This paper includes the current state of empirical research of tax support for R&D and innovation in the Russian Federation, as well as a survey of the demand for its tools from research institutes, universities performing R&D, and manufacturing enterprises, which was conducted in 2012-2013. The results obtained demonstrate the power of empirical analysis and optimization of R&D and innovation tax incentives in the Russian Federation, against the background of the field's best practices and current trends.