According to the OECD, reforming tax incentives to encourage businesses to invest in research and development (R&D) would give countries a better return on their investment and support young innovative firms that play a crucial role in job creation. In its latest report, entitled Supporting Investment in Knowledge Capital, Growth and Innovation, the OECD said over a third of all public support for business R&D in the OECD is via tax incentives. Multinational enterprises (MNEs) benefit the most, as they can use tax planning strategies to maximise their support for innovation. However, the OECD said this can create an unlevel playing field that disadvantages purely domestic and young firms.
The OECD said important aspects of tax schemes that should be reviewed include the scope of eligible R&D, the firms that qualify and the treatment of large R&D performers. The OECD also said governments should review their R&D tax incentive schemes as part of the broader global effort to tackle base erosion and profit shifting (BEPS). In this regard, the OECD noted the tax rules that enable MNEs to shift profits from intellectual assets, such as patents, are already being reviewed as part of the OECD’s Action Plan on BEPS.
Source: OECD media release, 10 October 2013
[LTN 198, 14/10/13]