OECD SCIENCE, TECHNOLOGY AND INDUSTRY SCOREBOARD 2015 OECD Data and Statistics on R&D Tax Incentives Governments worldwide adopt various support instruments to promote business R&D. In addition to providing grants and buying R&D services (“direct” support), many also provide fiscal incentives. Tax incentives for business R&D expenditures include allowances and credits, as well as other forms of advantageous tax treatment such as allowing for the accelerated depreciation of R&D capital expenditures. On a purchasing power parity basis, gross domestic expenditure on R&D (GERD) in the OECD area amounted to USD 1.13 trillion in 2013, the equivalent of 2.4% of total OECD GDP. Business R&D accounts for approximately 68% of total R&D performed in the OECD area. In 2015, 28 of the 34 OECD countries and a number of non-OECD economies gave preferential tax treatment to business R&D expenditures. This figure has been steadily rising over time. As of 2013, approximately 6.9% of business R&D was directly funded by governments. R&D tax incentives account for the equivalent of an additional 5.2% of public funding of business R&D. Reliance on R&D tax incentives has generally increased relative to various forms of direct support. A comparison of public support provided in 2013 and 2006 shows an increase in the relative importance of tax incentives among 16 out of 28 countries for which data are available. Korea, the Russian Federation and France provided the most combined support for business R&D as a percentage of GDP in 2013, while the United States, France and China provided the largest volumes of tax support. In relative terms, the largest amount of R&D tax support was provided by the Netherlands – 87% as percentage of total government support – and Australia and Canada with approximately 85%. The combined value of this support in 2013, across the OECD and major economies (Brazil, China, the Russian Federation and South Africa), was close to USD 50 billion, and amounted to approximately USD 40 billion in the OECD area alone. The design of R&D tax incentives influences the "expected" generosity of tax relief per additional unit of R&D investment. Across OECD and partner economies providing tax relief, there is a significant variation in tax subsidy rates for firms of different size and profitability. The OECD median tax subsidy rate is estimated at 0.19 for profitable and of 0.13 for loss-making SMEs, above the OECD median of 0.13 for large profitable firms and of 0.10 for large loss- making enterprises. This result is attributable to the preferential tax treatment that currently only 12 out of OECD countries provide for SMEs or young firms vis-à-vis large firms.
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OECD SCIENCE, TECHNOLOGY AND INDUSTRY SCOREBOARD 2015
OECD Data and Statistics on R&D Tax Incentives
Governments worldwide adopt various support instruments to promote business R&D. In
addition to providing grants and buying R&D services (“direct” support), many also provide fiscal
incentives. Tax incentives for business R&D expenditures include allowances and credits, as
well as other forms of advantageous tax treatment such as allowing for the accelerated
depreciation of R&D capital expenditures.
On a purchasing power parity basis, gross domestic expenditure on R&D (GERD) in the OECD
area amounted to USD 1.13 trillion in 2013, the equivalent of 2.4% of total OECD GDP.
Business R&D accounts for approximately 68% of total R&D performed in the OECD area.
In 2015, 28 of the 34 OECD countries and a number of non-OECD economies gave preferential
tax treatment to business R&D expenditures. This figure has been steadily rising over time. As
of 2013, approximately 6.9% of business R&D was directly funded by governments. R&D tax
incentives account for the equivalent of an additional 5.2% of public funding of business R&D.
Reliance on R&D tax incentives has generally increased relative to various forms of direct
support. A comparison of public support provided in 2013 and 2006 shows an increase in the
relative importance of tax incentives among 16 out of 28 countries for which data are available.
Korea, the Russian Federation and France provided the most combined support for business
R&D as a percentage of GDP in 2013, while the United States, France and China provided the
largest volumes of tax support. In relative terms, the largest amount of R&D tax support was
provided by the Netherlands – 87% as percentage of total government support – and Australia
and Canada with approximately 85%.
The combined value of this support in 2013, across the OECD and major economies (Brazil,
China, the Russian Federation and South Africa), was close to USD 50 billion, and amounted to
approximately USD 40 billion in the OECD area alone.
The design of R&D tax incentives influences the "expected" generosity of tax relief per
additional unit of R&D investment. Across OECD and partner economies providing tax relief,
there is a significant variation in tax subsidy rates for firms of different size and profitability. The
OECD median tax subsidy rate is estimated at 0.19 for profitable and of 0.13 for loss-making
SMEs, above the OECD median of 0.13 for large profitable firms and of 0.10 for large loss-
making enterprises. This result is attributable to the preferential tax treatment that currently only
12 out of OECD countries provide for SMEs or young firms vis-à-vis large firms.
For more information
OECD Science, Technology and Industry Scoreboard 2015: R&D Tax Incentives
Key features of R&D tax incentives and rationale
Features of expenditure-based R&D tax incentives
Box 1. Tax incentives for business R&D – expenditure and income based provisions
Note: The “median OECD+ tax incentive” reflects the median characteristics of R&D tax incentive schemes available in OECD and partner economies (Brazil, China, Russian Federation and South Africa) as of July 2015. If the analysis is limited to OECD countries, the median “OECD tax incentive” further includes the cost of acquiring software, licences and IP rights as eligible R&D expenditure. Some countries have more than one separately identified incentive scheme.
Source: OECD, Measuring R&D Tax Incentives, www.oecd.org/sti/rd-tax-stats.htm, October 2015.
Number of schemes
Refundability of unused credits (payable credit)
Carry-over provision
Threshold/Ceiling
Preferential treatment of SMEs/young firms
Limited (mean: 8 yrs., median: 5 yrs.) Indefinite Not applicable
OECD Science, Technology and Industry Scoreboard 2015: R&D Tax Incentives
How much financial support do governments provide through R&D tax incentives?
Tax subsidy rates
Figure 2. Implied tax subsidy rates on R&D expenditures, 2015
1-B-Index, by firm size and profit scenario
Source: OECD STI Scoreboard 2015, based on OECD, R&D Tax Incentive Indicators, www.oecd.org/sti/rd-tax-stats.htm and Main Science and Technology Indicators, www.oecd.org/sti/msti.htm, June 2015.
OECD Science, Technology and Industry Scoreboard 2015: R&D Tax Incentives
The value of R&D tax expenditures
Figure 3. Direct government funding of business R&D and tax incentives for R&D, 2013
As a percentage of GDP
Source: OECD STI Scoreboard 2015, based on OECD, R&D Tax Incentive Indicators, www.oecd.org/sti/rd-tax-stats.htm and Main Science and Technology Indicators, www.oecd.org/sti/msti.htm, June 2015.
OECD Science, Technology and Industry Scoreboard 2015: R&D Tax Incentives
Trends in R&D tax support volumes
Figure 4. Trends in government tax incentive and direct support for business R&D, 2000-13
Tax support as a percentage of total (direct and tax) government support for business R&D, selected countries
Source: OECD STI Scoreboard 2015, based on OECD, R&D Tax Incentive Indicators, www.oecd.org/sti/rd-tax-stats.htm and Main Science and Technology Indicators, www.oecd.org/sti/msti.htm, June 2015.
OECD Science, Technology and Industry Scoreboard 2015: R&D Tax Incentives
Figure 5. Change in government support for business R&D through direct funding and tax incentives, 2006-13
As a percentage of total support, and annualised growth rates
Source: OECD STI Scoreboard 2015, based on OECD, R&D Tax Incentive Indicators, www.oecd.org/sti/rd-tax-stats.htm and Main Science and Technology Indicators, www.oecd.org/sti/msti.htm, June 2015.
Statlink: http://dx.doi.org/10.1787/888933274322
The relationship between government support for business R&D and R&D performance
OECD Science, Technology and Industry Scoreboard 2015: R&D Tax Incentives
Figure 6. Business R&D intensity and government support to business R&D, 2013
As a percentage of GDP
Source: OECD STI Scoreboard 2015, based on OECD, R&D Tax Incentive Indicators, www.oecd.org/sti/rd-tax-stats.htm and Main Science and Technology Indicators, www.oecd.org/sti/msti.htm, June 2015.