Home  Journals  Finance and Credit  2(782) - 2019 February

Tax incentives for small and medium-sized business R&D

Vol. 25, Iss. 2, FEBRUARY 2019

Article PDF Version

Received: 22 November 2018

Received in revised form: 7 December 2018

Accepted: 21 December 2018

Available online: 28 February 2019

Subject Heading: FISCAL SYSTEM

JEL Classification: H20, H25, O31

Pages: 409–425

https://doi.org/10.24891/fc.25.2.409

Subject Small and medium-sized enterprises play a special role in high-tech product manufacture and promotion. Therefore, additional tax incentives for small and medium-sized innovative enterprises should be an important area of government regulation.
Objectives The study aims to investigate tax regulation of R&D in Russia and foreign countries, focusing on special conditions for small and medium-sized high-tech businesses.
Methods In the course of the study, we reveal special conditions for small and medium-sized innovative businesses. Based on OECD statistics, we analyze the level of tax incentives for R&D.
Results The paper identifies countries that apply tax incentives or direct funding for R&D. The State support to innovation is high enough in all of them, though developed countries do not have a single approach to incentives for knowledge-intensive SMEs. In Russia, the businesses conducting research and development also have government support. However, the values of 1-B index that characterizes the tax subsidy rate are low. This points to the lack of priorities for high-tech SMEs.
Conclusions More significant tax incentives for small and medium-sized enterprises will have a beneficial impact on innovation growth in Russia.

Keywords: corporate income tax, innovation, research and development, small and medium-sized business, tax credit

References:

1. Vylkova E.S. [Improving tax incentives for R&D and innovation in the Russian Federation]. Nalogi i finansovoe pravo = Taxes and Financial Law, 2015, no. 10, pp. 128–134. (In Russ.)
2. Pokrovskaya N.V. [Impact of crisis for tax conditions in Russian companies' debt financing]. Nauchnyi zhurnal NIU ITMO. Seriya: Ekonomika i ekologicheskii menedzhment, 2015, no. 4, pp. 70–76. (In Russ.)
3. Mamuneas T.P., Nadiri M.I. Public R&D policies and cost behavior of the US manufacturing industries. Journal of Public Economics, 1996, vol. 63, iss. 1, pp. 57–81. URL: Link
4. McFetridge D.G., Warda J.P. Canadian R&D Incentives: Their Adequacy and Impact. Toronto, Canadian Tax Foundation, 1983.
5. Bernstein J.I. The effect of direct and indirect tax incentives on Canadian industrial R&D expenditures. Canadian Public Policy, 1986, vol. 12, no. 3, pp. 438–448.
6. Goto A., Wakasugi R. Technology Policy. In: Industrial Policy of Japan. Tokyo, Academic Press, 1988.
7. Mansfield E., Switzer L. How effective are Canada's direct tax incentives for R&D? Canadian Public Policy, 1985, no. 11, pp. 241–246.
8. Viktorova N.G. [Innovative activities in sphere of high technology: Tax and legal aspects]. Innovatsii = Innovation, 2012, no. 10, pp. 43–47. URL: Link (In Russ.)
9. Ermakova E.A., Larionov N.A. [Tax credits in the system of innovative activity stimulation]. Upravlenets, 2015, no. 2, pp. 4–10. URL: Link (In Russ.)
10. Ryumina Yu.A., Balandina A.S., Bannova K.A. Nalogovoe stimulirovanie deyatel'nosti khozyaistvuyushchikh sub"ektov v sovremennykh usloviyakh [Tax incentives for business entities in modern conditions]. Tomsk, STT Publ., 2014, 276 p.
11. Tyupakova N.N. [Problems of tax regulation of investment processes in the Russian economy]. Teoriya i praktika obshchestvennogo razvitiya = Theory and Practice of Social Development, 2011, no. 2, pp. 276–279. (In Russ.)
12. Tyupakova N.N., Bocharova O.F. [Features of tax mechanism in transitive economy]. Nauchnyi zhurnal Kubanskogo gosudarstvennogo agrarnogo universiteta, 2011, no. 66, pp. 222–234. (In Russ.) URL: Link
13. Troyanskaya M.A. [Assessing the forms of tax incentives for innovation in the regions of the Volga Federal District]. Ekonomika i upravlenie = Economics and Management, 2013, no. 5, pp. 80–84. (In Russ.)
14. Troyanskaya M.A., Tyurina Yu.G. [Evaluation of tax regulation of individual investment types]. Ekonomika. Nalogi. Pravo = Economics, Taxes and Law, 2013, no. 3, pp. 80–88. URL: Link (In Russ.)
15. Il'chenko V.V., Soboleva O.A. [Development of taxation of small businesses in the special tax regimes]. Territoriya novykh vozmozhnostei. Vestnik Vladivostokskogo gosudarstvennogo universiteta ekonomiki i servisa, 2012, no. 1, pp. 98–104. URL: Link (In Russ.)
16. Lyalina Zh.I., Sinenko O.A. [Improvement the patent system of taxation in the Russian Federation]. Ekonomika i predprinimatel'stvo = Journal of Economy and Entrepreneurship, 2015, no. 11-2, pp. 853–857. (In Russ.)
17. Burov V.Yu. [Tax evasion by small businesses as a form of manifestation of shadow economic relations]. Nalogi i finansovoe pravo = Taxes and Financial Law, 2012, no. 9, pp. 118–124. URL: Link (In Russ.)
18. Vylkova E.S., Krasavin V.I. Formirovanie nalogovykh l'got v sub"ektakh Rossiiskoi Federatsii (na primere SZFO): monografiya [Formation of tax benefits in the subjects of the Russian Federation (the Northwestern Federal District case)]. St. Petersburg, FTS Publ., 2011, 277 p.
19. Bykov S.S., Zimmermann H. Tax expenditure as a problem in intergovernmental relations. Journal of Tax Reform, 2018, vol. 4, no. 1, pp. 27–44. URL: Link
20. Orlova E.N., Bykov S.S. [Role of local budget tax expenditures in forming tax potential]. Problemy ekonomiki = Problems of Economy, 2012, no. 3, pp. 36–46. URL: Link (In Russ.)
21. Bannova K.A., Knyazeva M.V. [Problems and ways of improving the assessment of tax benefit efficiency]. Baikal Research Journal, 2015, vol. 6, no. 3, pp. 5. URL: Link (In Russ.)
22. Troyanskaya M.A., Ermakova E.A. [An overview of the world experience of fiscal regulation]. Vestnik Saratovskogo gosudarstvennogo sotsial'no-ekonomicheskogo universiteta = Bulletin of Saratov Socio-Economic University, 2014, no. 3, pp. 91–95. URL: Link (In Russ.)
23. Bloom N., Griffith R., Van Reenen J. Do R&D tax credits work? Evidence from a panel of countries 1979–1997. Journal of Public Economics, 2002, vol. 85, iss. 1, pp. 1–31.
24. Athukorala P., Kohpaiboon A. Multinational enterprises and globalization of R&D: A study of U.S.-based firms. Australian National University Departmental Working Papers, 2006, no. 06.
25. Malerba F. Sectoral systems of innovation and production. Research Policy, 2002, vol. 31, iss. 2, pp. 247–264. URL: Link
26. Freitas I.B., Castellacci F., Fontana R. et al. Sectors and the additionality effects of R&D tax credits: A cross-country microeconometric analysis. Research Policy, 2017, vol. 46, iss. 1, pp. 57–72. URL: Link
27. Brown J.R., Martinsson G., Petersen B.C. What promotes R&D? Comparative evidence from around the world. Research Policy, 2017, vol. 46, iss. 2, pp. 447–462. URL: Link
28. Castellacci F., Lie C.M. Do the effects of R&D tax credits vary across industries? A meta-regression analysis. Research Policy, 2015, vol. 44, iss. 4, pp. 819–832. URL: Link
29. Almus M., Czarnitzki D. The effects of public R&D subsidies on firms' innovation activities: The case of Eastern Germany. Journal of Business and Economic Statistics, 2003, vol. 21, no. 2, pp. 226–236. URL: Link
30. Parisi M.L., Sembenelli A. Is private R&D spending sensitive to its price? Evidence from data for Italy. Empirica, 2003, vol. 30, iss. 4, pp. 357–377. URL: Link
31. Blanes J.V., Busom I. Who participates in R&D subsidy programs? The case of Spanish manufacturing firms. Research Policy, 2004, vol. 33, iss. 10, pp. 1459–1476.
32. Paff L.A. Does the alternate incremental credit affect firm R&D? Technovation, 2004, vol. 24, iss. 1, pp. 41–52. URL: Link00144-5
33. Wang J.-C., Tsai K.-H. The impact of research and development promotion schemes in the Taiwanese electronic component industry. R&D Management, 1998, vol. 28, iss. 2, pp. 119–124. URL: Link
34. Huang C.-H. Three Essays on the Innovation Behavior of Taiwan's Manufacturing Firms. National Central University, Taiwan, 2009.
35. Yang C.-H., Huang C.-H., Hou T.C.-T. Tax incentives and R&D activity: Firm-level evidence from Taiwan. Research Policy, 2012, vol. 41, iss. 9, pp. 1578–1588. URL: Link
36. Jia J., Ma G. Do R&D tax incentives work? Firm-level evidence from China. China Economic Review, 2017, vol. 46(C), pp. 50–66. URL: Link
37. Crespi G., Giuliodori D., Giuliodori R., Rodriguez A. The effectiveness of tax incentives for R&D+i in developing countries: The case of Argentina. Research Policy, 2016, vol. 45, iss. 10, pp. 2023–2035.
38. Koga T. Firm size and R&D tax incentives. Technovation, 2003, vol. 23, iss. 7, pp. 643–648. URL: Link00010-X
39. Baghana R., Mohnen P. Effectiveness of R&D tax incentives in small and large enterprises in Quebec. Small Business Economics, 2009, vol. 33, iss. 1, pp. 91–107. URL: Link
40. Corchuelo M.B., Martìnez-Ros E. The effects of fiscal incentives for R&D in Spain. Business Economic Series Working Paper, 2009, vol. 02, pp. 9–23.
41. Yohei K. Effect of R&D tax credits for SMEs in Japan: A microeconometric analysis focused on liquidity constraints. Small Business Economics, 2014, vol. 42, iss. 2, pp. 311–327. URL: Link

View all articles of issue

ISSN 2311-8709 (Online)
ISSN 2071-4688 (Print)

Journal current issue

Vol. 30, Iss. 3 March 2024

Archive