Government support for business R&D: R&D tax incentives

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GOVERNMENT SUPPORT FOR BUSINESS R&D – R&D TAX INCENTIVES 2013 OECD Science Technology Industry Scoreboard

Transcript of Government support for business R&D: R&D tax incentives

Page 1: Government support for business R&D: R&D tax incentives

GOVERNMENT SUPPORT FOR BUSINESS R&D – R&D TAX INCENTIVES2013 OECD Science Technology Industry Scoreboard

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Research and Development is one of the main pillars of innovation.

Governments support business R&D through grants and other means as its benefits are far reaching.

Today, 27 of the 34 OECD countries and a number of non-OECD economies use tax incentives to reduce the cost of R&D investment.

How much does a Euro spent on R&D really cost to a firm?

New OECD estimates of tax subsidy rates* show that it

all depends on its location, size and balance sheet.

Government support for business R&D

*Implied tax subsidy rates are defined as 1 minus B index (Warda, J. (2001), “Measuring the Value of R&D Tax Treatment in OECD Countries”, STI Review No. 27: Special Issue on New Science and Technology Indicators, OECD Publishing.)

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Source: OECD Science, Technology and Industry Scoreboard 2013. http://dx.doi.org/10.1787/888932891150

Implied tax subsidy on R&D expenditures, 2013

The level of indirect support varies across countries, as indicated by the tax subsidy rate for small profitable firms.

But it may also vary across firm size…

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For example, if a small, profitable company in Portugal spends one euro on R&D, it can benefit from tax relief of up to 62 cents.

Source: OECD Science, Technology and Industry Scoreboard 2013. http://dx.doi.org/10.1787/888932891150

Implied tax subsidy on R&D expenditures, 2013

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By contrast, large firms get a tax benefit of only up to 49 cents. But Portugal is unusual.

Source: OECD Science, Technology and Industry Scoreboard 2013. http://dx.doi.org/10.1787/888932891150

Implied tax subsidy on R&D expenditures, 2013

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…less than one third of the OECD countries shown here give them more generous incentives.

Even though small firms everywhere find it harder to invest in R&D than bigger firms…

Source: OECD Science, Technology and Industry Scoreboard 2013. http://dx.doi.org/10.1787/888932891150

Implied tax subsidy on R&D expenditures, 2013

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Of course, many firms – especially small start-ups – lose money in their early years.

If they’re not making a profit, and so not paying tax, the value of R&D tax incentives can disappear …

Source: OECD Science, Technology and Industry Scoreboard 2013. http://dx.doi.org/10.1787/888932891150

Implied tax subsidy on R&D expenditures, 2013

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Source: OECD Science, Technology and Industry Scoreboard 2013. http://dx.doi.org/10.1787/888932891150

Of course, many firms – especially small start-ups – lose money in their early years.

If they’re not making a profit, and so not paying tax, the value of R&D tax incentives can disappear …

Implied tax subsidy on R&D expenditures, 2013

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Implied tax subsidy on R&D expenditures, 2013

Source: OECD Science, Technology and Industry Scoreboard 2013. http://dx.doi.org/10.1787/888932891150

Of course, many firms – especially small start-ups – lose money in their early years.

If they’re not making a profit, and so not paying tax, the value of R&D tax incentives can disappear …

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Source: OECD Science, Technology and Industry Scoreboard 2013. http://dx.doi.org/10.1787/888932891150

Of course, many firms – especially small start-ups – lose money in their early years.

If they’re not making a profit, and so not paying tax, the value of R&D tax incentives can disappear …

Implied tax subsidy on R&D expenditures, 2013

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That’s why some countries allow firms to roll over or cash their tax credits.

But, in many cases, small firms that make a loss don’t enjoy the same tax benefits as profitable firms.

Source: OECD Science, Technology and Industry Scoreboard 2013. http://dx.doi.org/10.1787/888932891150

Implied tax subsidy on R&D expenditures, 2013

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Source: OECD Science, Technology and Industry Scoreboard 2013. http://dx.doi.org/10.1787/888932891150

Implied tax subsidy on R&D expenditures, 2013

According to OECD research, the real subsidy for small firms that are making a loss…

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Source: OECD Science, Technology and Industry Scoreboard 2013. http://dx.doi.org/10.1787/888932891150

Implied tax subsidy on R&D expenditures, 2013

… matches the subsidy for profitable small firms in only a few OECD countries.

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Source: OECD Science, Technology and Industry Scoreboard 2013. http://dx.doi.org/10.1787/888932891150

Implied tax subsidy on R&D expenditures, 2013

Small firms, and start-ups in particular, drive radical innovations and job creation.

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Source: OECD Science, Technology and Industry Scoreboard 2013. http://dx.doi.org/10.1787/888932891150

Implied tax subsidy on R&D expenditures, 2013

OECD work shows the need to design R&D tax incentives effectively to ensure both big – and small firms – can innovate.

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For more information:

www.oecd.org/sti/rd-tax-stats.htm

2013 edition www.oecd.org/sti/scoreboard