The OECD has called on governments to reform the use of R&D tax incentives to increase support for young innovative firms with a view to boosting job creation and providing a better return on investment.
In their report, Supporting Investment in Knowledge Capital, Growth and Innovation, the OECD highlights that over a third of all public support for R&D is via tax incentives, but that multinational enterprises benefit the most from these as they can use tax planning strategies to maximise their support for innovation.
The OECD wants governments to review their national R&D tax incentive schemes, looking at issues such as the scope of eligible R&D and the firms that qualify as well as considering direct support in the form of grants and contracts.
It is worth noting that R&D tax incentives in the UK are already addressing several of the points raised by the OECD. For example, companies making insufficient profits to claim the benefit as a tax deduction are able to receive a payable credit. Additionally, the new ‘Above the Line’ credit for larger companies has been set up to ensure that the benefit is recognised within operating profit for accounting purposes, improving visibility of the relief – another of the OECDs suggested reforms.
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