government support for business r&d: r&d tax incentives
TRANSCRIPT
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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
![Page 9: Government support for business R&D: R&D tax incentives](https://reader034.vdocuments.us/reader034/viewer/2022042722/58adfb441a28abf0628b5c59/html5/thumbnails/9.jpg)
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