№ 11/2017

Fìnansi Ukr. 2017 (11): 65–88https://doi.org/10.33763/finukr2017.11.065

TAX POLICY

SOKOLOVSKA Alla ¹, RAINOVA Larysa ²

¹SESE “The Academy of Financial Management”
OrcID ID : https://orcid.org/0000-0002-1022-8215
²SESE "The Academy of Financial Management"
OrcID ID : https://orcid.org/0000-0002-8275-3094

Tax instruments for stimulating R&D in Europe and the world: design and peculiarities of use

The article substantiates the need for tax stimulation of propensity of the private sector to invest into research and development in Ukraine in the context of ensuring sustainable and dynamic economic growth on an innovative basis as a condition for narrowing the gap in levels of economic development between Ukraine and its European neighbors – EU members. It is noted that in many countries of the world such stimulation is carried out through time-tested tax instruments, the most common of which are R&D tax allowance and R&D tax credit. The analysis of tax incentives in Ukraine revealed only the use of exemptions and preferential rates of corporate income tax for certain types of activities and investment projects that had low innovation potential and were cancelled during 2014-2015 and certain VAT incentives for innovation which are not applied in the EU countries. The purpose of the article is a comprehensive analysis of the elements of the functioning of the most widely used R&D tax incentives in the EU countries as prerequisites for their implementation in Ukraine. To achieve this, the experience of using tax incentives in the EU and OECD countries is summarized and present approaches to the formation of their main elements are analyzed: the definition of R&D for tax purposes, the composition of qualified R&D expenditures as a basis for calculating the amount of tax benefits, possibilities and mechanism for their reimbursement, and restrictions for application. It is concluded that the choice of the type of tax benefit that can bring expected results in Ukraine and the specific design of its elements should be carried out taking into account the specifics of the institutional environment, existing fiscal constraints and priorities of social and economic development. The authors establish factors influencing the effectiveness of tax incentives for R&D, namely: 1) design of the tax incentives; 2) efficiency of institutions that manage the national innovation system and tax administration; 3) business propensity to innovate and its reaction to tax incentives. It is substantiated that the introduction of R&D tax incentives and capital investments in corporate income tax, which directly relates the size of tax benefits to the amount of investments, may be an alternative to the distributed profit tax, whose introduction is under active discussion in Ukraine.

Keywords:expenditure-based R&D tax incentives, income-based R&D tax incentives, R&D tax allowance, R&D tax credit, refundable tax credit, qualified R&D expenditures

JEL: Н21, Н50, О38

Sokolovska A. . Tax instruments for stimulating R&D in Europe and the world: design and peculiarities of use / A. . Sokolovska, L. . RAINOVA // Фінанси України. - 2017. - № 11. - C. 65-88.

Article original in Ukrainian (pp. 65 - 88)

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