Tax Incentives For Innovation Research Articles

Do tax incentives for innovation attract high‐technology investment from emerging markets? Evidence from China's outward foreign direct investment

AbstractWe examine whether the innovation box regime (IBR), a tax incentive with lower tax rates on intellectual property (IP)‐related income, attracts high‐technology investment from emerging markets. Using the staggered difference‐in‐differences (DID) method, we find that China's high‐technology investment in IBR countries, relative to non‐IBR countries, increases significantly after the implementation of IBR. This finding is robust to a battery of sensitivity tests. The mechanism analysis suggests that the attraction of the IBR for high‐technology investment is realised through the encouragement of innovation, and this finding is also verified in the heterogeneity analysis. We also find that the IBR has a positive effect on high‐technology investment only if the tax incentives apply to pre‐existing IP before the regime implementation, and the ease with which enterprises can directly use the latest technologies in the host country does not have an impact on the effectiveness of the IBR. Moreover, the effect of IBR on M&A is larger than that on greenfield investment. Our study contributes to the literature and policy assessment on IBR.

Corporate Income Tax Preferences as a Tool to Stimulate Innovation

The level of economic growth in Russia at the moment is largely determined by such factors as the number of scientific achievements and the general level of technology development in the country. The Russian Federation does not lag behind in terms of scientific and technological achievements, and it can be said with confidence that at the moment the country has a sufficient number of innovative developments. However, among the weaknesses it should be noted the sector of tax incentives for innovation, which in Russia is developing at a relatively slow pace. In this regard, the purpose of this study is to identify and develop practical recommendations on the issue of stimulating innovation through the application of corporate income tax preferences. The subject of the study is corporate income tax preferences as one of the tools to encourage organizations to invest in innovation and digital development. The main conclusion of the study is that corporate income tax preferences currently do not play such a significant role in stimulating innovative organizations and innovative projects. In order to increase the effectiveness of stimulating innovative enterprises with the help of income tax preferences, it is necessary to pay attention to the problematic aspects indicated in the article, which are often the cause of tax disputes. In addition, this article indicates possible directions for solving these problematic issues, which in the future can generally improve the state of the tax system of the Russian Federation.

НАЛОГОВЫЕ СТИМУЛЫ ИННОВАЦИОННОГО РАЗВИТИЯ НА ПРЕДПРИЯТИЯХ ЭНЕРГЕТИЧЕСКОЙ ОТРАСЛИ РФ

The article presents the results of variable forecasting of project implementation opportunities at energy sector enterprises in the modern economy of the Russian Federation. The author analyzed the world and Russian experience of introducing innovative technologies in the energy sector using tax instruments. Further, the most effective tools used abroad to intensify the activity of enterprises in the implementation of energy-saving projects were briefly outlined. The section "Methodology" identifies priority approaches to forecasting in the segment of energy saving projects. The author also emphasizes the fact that the development and implementation of tax incentives for innovation in this area is fragmentary; the conclusion is made about the actual absence of such measures, as well as the practice of developing and applying tax incentives in the Russian Federation. The section "Results and discussion" presents options for predictive calculations carried out taking into account the presented approaches. The possibilities of modeling energy efficiency parameters are investigated; thus, it is established that the amount of budget revenues will differ when using different periods of accelerated depreciation; at the same time, budget revenues will also be different. The relationship between budget revenues and the chosen option for calculating the depreciation period of equipment used in a particular project is also noted and illustrated. In conclusion, proposals are presented for the formation of a model for evaluating the effectiveness of energy-saving projects using tax instruments, as well as promising research vectors (for example, other factors affecting the final efficiency of energy-saving projects can be taken into account).

ІНСТИТУЦІЙНІ АСПЕКТИ УПРАВЛІННЯ ПОДАТКОВИМ ПОТЕНЦІАЛОМ ПРОМИСЛОВОСТІ

The priority direction of tax policy is the formation of tax potential, which includes the creation of conditions for the intensification of entrepreneurial activity, the formation of active development actors, the expansion of sources of tax revenue, the stimulation of innovation and investment activity. At the same time, in Ukraine, the lack of systemic directions of tax incentives for innovation in the legislation and practice of tax instruments significantly hinders the development of innovation potential of the economy and reduces its competitiveness. The basis for improving tax policy in the context of innovative development is the institutional component. The purpose of the study is to identify promising institutional aspects of the formation of tax potential in industry. The methodological basis of the study were analytical reviews, regulations, modern scientific and applied research in the field of innovation. The research uses methods of dialectics, methods and principles of scientific knowledge, tools of economic analysis to substantiate proposals for the formation of institutional foundations for the formation of tax potential. The main hypothesis of the study was the assumption that tax policy, which is aimed at developing innovation, largely determines the economic interest of industrial enterprises in the introduction of new technologies, as financial resources released from the tax potential of the enterprise can be directed to its innovation and investment activity. Presenting main material. The strategic task of tax potential management is to increase and strengthen the tax base by stimulating investment and innovation activity; support of enterprises in order to develop production and increase production. The tax potential is considered in the context of institutional innovation projects and smart specialization. An assessment of the prospects for the use of various tax instruments in accordance with the current situation and the need for the transition to adaptive management of tax potential of industry. The originality and practical significance is confirmed by the proposed scientific and methodological approaches to the management of tax potential in the context of innovative development. Conclusions and prospects for further research. Measures to increase the tax potential should include expanding the tax base not only through existing reserves, but also creating a new base through the development of innovation potential. The implementation of the relevant institutional strategy should be aimed not at simple maximization of tax revenues, but at the development of investment and innovation potential with the establishment of favorable conditions for the development of priority projects. Further research will focus on the analysis of the peculiarities of the use of tax tools in the framework of specific institutional and innovative projects of economic development.

Бюджетна ефективність податкового стимулювання інноваційної діяльності

The article is devoted to the topical issues of determining the budget effectiveness of the use of tax incentives for innovation. The conceptual difference between “budgetary effect” and “budget efficiency” has been defined. A reasonable criterion of the budgetary effect, which is proposed to calculate as the difference between financial results of innovation and expenditures (temporary budget losses) to stimulate innovation. The method of justifying the budgetary effect of tax incentives for innovation by applying an increased standard of write-offs on the cost of spending on scientific and scientific and technical works has been proposed. The proposed methodology uses a recursive model for calculating tax revenues starting with the development of innovative products, which occurs as a result of the reinvestment by the subject of innovation in the first stage – savings from tax cuts, in the second and subsequent stages – the said savings and part of the increase in profits. The increments of investment resources of the subject of innovation and budget revenues are determined taking into account the factor of time of their receipt by the method of discounting. The budgetary effect is proposed to assess during the regulatory period of return on investment. The article contains a logical illustration of the recursive model of tax revenues and the calculation formula. Based on the data of the innovative enterprise, the indicators of the budget effect, the internal rate of budget revenue and the payback period of its losses, which arise due to the introduction of an increased rate of write-off for the cost of scientific and scientific-technical works have been calculated . It is recommended when making decisions on the feasibility of tax incentives for innovation to take into account the stimulating function of taxes, which is manifested in increased motivation of entrepreneurs to innovate. Keywords: taxes, tax policy, innovation, budget efficiency.

Tax incentives for innovation in the context of macroeconomic stability: an analysis of causality

The article deals with the topical issue of R&D tax incentives and their impact on the level of innovation development and macroeconomic stability. The research is based on causality analysis and estimation of the strength, time lags and directions of mutual influence of R&D tax incentives and macro indicators. Systematization literary sources and approaches for solving this problem indicates that R&D tax incentives are studied in fragments in the context of macroeconomic stability. The research's main purpose is to improve the methodological bases of substantiation of the choice of relevant instruments of innovation stimulation considering causal relations of R&D tax incentives and macro indicators. The paper presents the results of dynamic analysis of R&D tax incentives in 13 European countries, for which OECD statistics for 2007-2017 are freely available. The significance, strength, and nature of the relationship between these indicators and the following macro indicators are determined: the level of the country's innovation development, the share of investment in GDP (in general and in the corporate sector in particular), net international investment position, the share of the business sector in the cost structure of R&D. Pearson and Spearman correlation coefficients were calculated depending on the variable subordination to the law of normal distribution (verified by the Shapiro – Wilk test) on the admissible calculation interval taking into account time lags from 0 years to 3 years. The causality of the studied indicators was established using the Granger causality test. The calculations are important for the prioritization of instruments for the implementation of innovation support. The highest priority should be given to the establishment of tax incentives for R&D, as this tool's impact on all studied macro indicators in most countries was direct. Its effect was manifested in the shortest possible time (with a lag of 0-3 years). The second priority should be given to setting hidden rates of business tax subsidies on R&D, as this indicator's impact on most of the studied indicators was statistically significant and direct with a time lag of 0–3 years. The paper substantiates the inefficiency of direct public financial support, as the impact of this indicator on most of the analyzed macro-indicators was reversed with a lag of 0–2 years. Thus, it is more expedient for the state to help entrepreneurs by providing tax benefits to provide innovation development and macro stability than through direct reimbursement of costs. Moreover, lag regression models were built for those countries where identified links were the most important (Belgium, Denmark, the Netherlands, and the Czech Republic). They take into account inflation rates and interest rates on long-term liabilities and the number of labour resources in the country as control variables.

СИСТЕМА ПОДАТКОВОГО СТИМУЛЮВАННЯ ІННОВАЦІЙНОЇ ДІЯЛЬНОСТІ: СТАН І ПЕРСПЕКТИВИ

The article examines the mechanisms of tax incentives for innovation of economic entities, which should focus on the development of national production and ensure sustainable macroeconomic growth. It was found that the main problems of the domestic economy, which create barriers to its innovative renewal, are the weak links between science and industry, lack of demand from industry and research and development, very low level of technical equipment of the economy, lack of market motivation for the development of knowledge-intensive production, worn-out equipment and, as a result, low efficiency of the economy as a whole. It is proved that among the main reasons for the reduction of budget revenues in the economy of Ukraine, in addition to the crisis, there are also tax benefits. For certain areas of business, this is one of the most attractive types of government support, as it means that some businesses are starting to pay less taxes. The rest, respectively, must be paid by other business structures or the state receives less money to finance its expenditures. As a result, inequality between taxpayers and a simultaneous reduction in the amount of funds that can be collected by the Ministry of Finance. Thus, in 2019 alone, due to the provision of tax benefits, the state budget did not receive budget revenues equivalent to 1.3 billion US dollars. Total budget losses from this source during 2015-2019 amounted to 6.4 billion dollars. It was found that in Ukraine there is almost no system for monitoring the impact of tax benefits, and this does not allow to assess the future effect of the introduction of such measures. Of course, this has important negative consequences for both public finances and the economy as a whole. The influence of granting tax benefits on the loss of state budget revenues is analyzed. Specific measures aimed at tax incentives for the development of innovation in Ukraine, the introduction of innovations by economic entities of all sizes are proposed. The need to rethink the criteria for granting tax benefits is noted. Foreign practice of tax incentives for innovation and investment activities, the cost of innovation is time-tested and quite diverse. Undoubtedly, it can be useful in the development of this area of tax incentives in Ukraine.

An assessment of R&D tax credits and their role towards innovation within Irish industry

Abstract The Irish Government has identified research and development (R&D) and innovation as among the key pillars of growth within the economy. To achieve this growth, R&D tax incentives, which are adopted in advanced economies, are set into policy to encourage firms to innovate, thus, making companies more competitive and productive. One of the key enablers to driving R&D is a well-designed, competitive and sustainable tax policy to support the activity. However, evidence on the effectiveness of R&D tax incentives for innovation is largely anecdotal and the influence of innovation on firm-level taxation is still underexplored, in terms of and empirical examination. This paper sets out to review the recent trends and views of industry regarding R&D tax credits.

EVALUATION REGULATORY POTENTIAL OF PREFERENTIAL TAXATION OF ENTERPRISE INNOVATION ACTIVITY

Introduction. Indirect methods of regulating innovation are increasingly used by countries around the world. These methods include preferential taxation. However, unreasonable and unsystematic application of tax incentives can also have negative consequences, such as loss of the state budget or tax evasion. Assessing the regulatory potential of tax incentives for innovation is a pressing issue, as it reflects the need to address the conditions for granting tax incentives and their effectiveness. Methods. The assessment was based on a methodological approach to assessing the level of regulatory potential of preferential taxation of enterprise innovation activity, which involves the formation of a comprehensive system of indicators by components that are integrated into integral indicators and qualitatively interpreted on the basis of boundary intervals of scales and criteria. We used such methods of economic and mathematical analysis as a priori ranking, correlation analysis, linguistic analysis. Such methods were used in the selection of indicators to assess the regulatory potential of preferential taxation of an enterprise's innovation activity. Results. The integral values of the regulatory potential of preferential taxation of the enterprise innovative activity were obtained in the course of the evaluation according to the components "Innovative activity", "Efficiency of enterprises activity", "Preferential taxation", which were distributed according to the linguistic criteria obtained. The analysis revealed that the main problems of the regulatory potential of preferential taxation of enterprise innovative activity remain: the imperfection of regulatory support to stimulate enterprise innovation activity and irrational tax incentives, which leaves opportunities for tax evasion and does not provide incentives for innovation. Discussion. The tendency to decrease the values of the components of the regulatory potential of preferential taxation of innovation activity necessitates the development of measures and practical recommendations to support the efficiency of the enterprise and stimulate its innovation development by tax optimization methods.

ФІНАНСОВЕ ЗАБЕЗПЕЧЕННЯ РОЗВИТКУ ПІДПРИЄМСТВ АПК: ТЕНДЕНЦІЇ, ПРОБЛЕМИ, ПРІОРИТЕТИ

The article is devoted to research of problems and substantiation of priority directions of financial support of development of agrarian enterprises. The purpose of the research is to analyze the current state, tendencies for identifying problems and priorities of financial support for the development of agribusiness enterprises. The object of research - the tools of financial support for the development of agrarian enterprises. Methods used in the research: logical-content, methods of scientific knowledge, induction, analysis and synthesis. The hypothesis of research: priority sources of financing for the development of enterprises of agroindustrial complex: state support, lending, investment, mergers / acquisitions, stock instruments. The statement of the basic material: according to the results of the analysis of the state and trends of development of enterprises of the agricultural sector, the priority directions of its financial support were determined. Based on the study of world experience of resource subsidy models, the possibility of adapting key support models for separate segments of the agrarian enterprises activity, taking into account the peculiarities of their management, is shown. At this stage, the reform of the agrarian sector requires state support in the form of introducing privileges for innovative development and lending. Financing of innovations at domestic agrarian enterprises is usually carried out at its own expense in small volumes. The originality and practical significance of the research is to justify the tools for improving financial support for the development of agrarian enterprises, which combine tax incentives for innovation, leasing programs, innovation-oriented loans, venture financing, stock mechanisms, land mortgages, market instruments. Conclusions of the research: improving financial support will help to improve the system of state support by stimulating the development of particularly significant segments of the agro-sector for the region and the country as a whole.

Tax incentives for innovation in the energy sector

The article considers the current issues of stimulating innovation in the energy sector and rational use of energy resources. A three-level system of problem-oriented management of human resources for stimulating innovation in the energy sector is proposed. The system considers the impact of the human factor on innovative development at the national, regional and enterprise levels. Also, the need to encourage enterprises to hire highly qualified specialists in the sphere of energy saving and energy efficiency is proven. The role of the tax policy in state regulation of the rational use of energy resources and stimulation of innovation in the energy sector is substantiated. The tax incentives for the rational use of energy resources applied in the world practice are grouped. Features of the application of tax incentives (accelerated depreciation, tax credits, tax holidays, and tax reduction) for energy efficiency and energy saving of households and business entities are analyzed. Directions for stimulating innovation in the energy sector for the efficient use of energy resources are offered.

Impacts of the Brazilian innovation tax policy on the composition of private investments and on the type of innovation

O objetivo deste artigo é investigar se os incentivos fiscais para inovação da Lei 11.196/05 (BRASIL, 2005) alteraram a composição dos investimentos em inovação das empresas e seus resultados. Tomando por base o conceito de adicionalidade comportamental e o desenho da política fiscal, são apresentadas três proposições sobre como esses incentivos afetam a cesta de gastos com inovação, o nível educacional dos pesquisadores e o tipo de inovação desenvolvido pelas firmas. A partir de dados desagregados da Pesquisa de Inovação (PINTEC) de 2008 e 2011 e de outras fontes, o efeito médio do tratamento nas unidades tratadas (ATT) é estimado utilizando-se um pareamento por escore de propensão (PSM) com diferença-em-diferenças. As principais conclusões do estudo são: os incentivos impactaram positivamente a intensidade de pesquisa e desenvolvimento (P&D) dos investimentos em inovação das firmas, elevando os gastos com P&D em cerca de R$ 1,1 milhão na média, assim como reduzindo os gastos médios com aquisição de outros conhecimentos externos e com introdução de inovações no mercado; embora a política tenha fomentado a contratação adicional de pesquisadores com diploma de graduação, não foi encontrado impacto significativo para pessoal de pesquisa com titulação de mestrado ou doutorado; e não há evidência de impacto no balanço entre inovações de produto e processo.

STATE REGULATION OF TAX STIMULATION FOR INNOVATIVE ACTIVITIES OF ENTERPRISES

There are modeling the implications of introducing tax incentives for innovative enterprises. The appropriateness of tax incentives for innovation at the expense of incremental tax credit on corporate profit tax has been confirmed. There was proved that state regulation of incremental tax credit causes positive changes both for enterprises and for the state. There was determined that an increase in the amount of taxpayers' tax liabilities does not affect the increase of tax burden. The results prove the high capacity of incremental tax credit to stimulate innovation. Moreover, the role of the private sector is to transform the available financial resources (ie, net profit) into an investment and innovation resource. And the role of the public sector is to invest in the development of innovations through indirect funding (that is, "directing" those who have not received as a result of preferential taxation of capital investments). At the same time such "direction" is carried out by providing tax incentives to innovative enterprises on the target conditions

ОСНОВНЫЕ ПРОБЛЕМЫ НАЛОГОВОГО СТИМУЛИРОВАНИЯ ИНВЕСТИЦИЙ В ИННОВАЦИОННОЕ РАЗВИТИЕ РЕАЛЬНОГО СЕКТОРА ЭКОНОМИКИ РОССИИ

Today, the main role in the process of increasing investment activity is assigned to state regulation. The pushing influence on the investment response of potential investors can be provided by various methods of regulation, among which are those that are implemented through tax incentives for investment in the innovative development of the real sector of the Russian economy. The authors of the article considers the main problems of tax stimulation of innovation activity in the real sector of the economy of the Russian Federation. In addition, forms and instruments of tax incentives for innovation have been studied.

Бюджетно-податкове стимулювання інноваційної діяльності в Україні

The article analyzes legal framework and practice of fiscal support for innovation in the form of tax incentives and budget funding. The authors summarized existing EU approaches to fiscal stimulation. The authors have analyzed two models of income tax reliefs: 1) Research and Development tax relief/super deduction (UK); 2) Research and Development tax credit and additional (premium) amortization of fixed assets for innovation projects (France). The authors have made estimations of the impact of tax incentives for these models and revealed certain conditions under which these models may appear ineffective. Authors recommend to use the second model for Ukrainian tax reform purposes, because such model is able to create the basis for the development of innovation activities, whereby tax savings would be used to acquire new technologies, fixed assets, equipment and intangible assets (given the high depreciation, low efficiency of capital investments and delays in implementing of new technologies). It is established that the development of innovative businesses and promoting scientific and technological activities of enterprises is a complex issue that affects various aspects of public administration. To ensure progress in this sphere, the following tasks should be completed: ensuring sufficient funding and good governance in education and fundamental scientific research; establishing transparent requirements for assistance to entrepreneurs in research and innovation; and increasing the number of tax incentives for innovation. The authors propose various amendments to the Tax and Customs Code of This article continues the discussion on the creation of an effective national research and innovation system that would speed up Ukraine's integration into the world economic and technological space, and concentrate available resources (capital, labor, market) to achieve national priorities as key factors for economic development. The article was written as part of the research on: Consolidation of public finances of in conditions of the global financial instability, Financial support for structural modernization of the real sector of Ukraine's completed at the for Economics and Forecasting, NAS of The article was written as part of the research on: Public finance consolidation in in the global financial instability, and Financial support for structural modernization of the real sector of economy of Ukraine completed at State Institution Institute for Economics and Forecasting of NAS of Ukraine.

Evaluating the Effectiveness of Tax Incentives in Order to Create a Modern Tax Mechanism Innovation Development

This article examines the current state of the system of tax incentives in the Russian Federation (RF), aimed at promoting innovation. It is noted that over the past five years, the significant changes have been introduced into the Tax Code of the Russian Federation (the Tax Code) to stimulate innovation. However, so far, the efforts of the State have not given any tangible results, and the system of tax incentives is still not self-sufficient and effective for controlling of the innovation process. At the moment, the measures in the main lines of the tax policy of the Russian Federation for 2014 and for the planning period of 2015 and 2016 are less diverse than those, realized in the previous period, since the efficiency level on innovation is not quite known. The main emphasis, now, is put on the monitoring program of tax benefits as the existing problem of low efficiency is recognized by all levels of government, and the particular changes in the system of tax incentives for innovation can not solve it by themselves. The authors analyze the advantages and disadvantages of existing tax benefits from the viewpoints of both business entities and the state. The necessity and possibility of evaluation of the effectiveness of tax incentives is considered, and, in this regard, it is proposed to develop a system of evaluation criteria allowing, firstly, the assessment of the degree of relief influence on the tax burden of business entities, engaged in innovative activities, and, secondly, determination of the benefits influence on the level of budget revenues.

Some aspects of determining the efficiency of tax incentives for innovation

The article considers the need to provide the tax incentives for innovation. The views of various authors on the definition of efficiency are presented. It was determined that during the tax incentives for innovation there are two sides, the state and enterprises which are engaged or will engage in innovative activities. However, the state has two interests, namely the interest of providing innovative activity suffering income losses of budget due to tax benefits and the interest of budget replenishment than to maintain and improve the society needs, especially social. The formula are proposed to calculate the efficiency for the mentioned concerned parties and their interests accordingly. For each of the three mentioned indexes of the tax incentives efficiency it is proposed the positive change direction and the extent of normative values.

Tax incentives for innovation: time to restructure the R&E tax credit

The R&E tax credit has never been effective and subsequent attempts to restructure it have not addressed the major deficiencies. Moreover, in the 25 years since the R&E tax credit was enacted, a steadily increasing number of countries have implemented or expanded competing tax incentives, which in many cases are better structured and larger in size. As a result, the relative impact of the US credit is now negative in terms of incentives to conduct R&D within the domestic economy. The inadequacy of the credit stems largely from its small size and its incremental format. The impact of an R&D tax incentive is affected by its scope of coverage, the ability of industry to take advantage of it over the entire R&D cycle, the magnitude of the incentive relative to other nations’ tax policies, and its ease of implementation. In the end, a tax incentive must sufficiently lower the user’s cost of R&D to overcome barriers to allocation of private-sector resources commensurate with the potential rates of return on such investments. As a policy instrument, a tax incentive for R&D should be most effective if its form is a flat rate applied to all R&D.