Prospects of R&D tax incentives in Ukraine: experience of innovative developed countries

In modern conditions decreasing total GDP in comparative prices reduces the share of innovation expenditures in GDP, which indicates a lack of innovation development in Ukrainian economy. The article is devoted to identifying the prospects of research and development (R&D) tax incentives in Ukraine for the economy innovation development. The changes in the Ukrainian legislation in the sphere of the R&D stimulation are reviewed. It is proved that in modern conditions the Tax Code of Ukraine does not provide a reduction of tax liabilities as a result of private innovation activities. In practice, the tax incentives for innovative activity in Ukraine are revealed through tax exemption of priority economic activities from basic taxes, such as income tax of enterprises and VAT. One of the most flexible instruments of state policy in the field of innovation is the R&D tax incentives. R&D tax incentives are used throughout the world to encourage R&D in private sector. It was determined that the current practice of innovation development in many countries provides a significant increase in investment in R&D. Tax credits and other fiscal incentives (for example, tax allowances) increase investments in R&D activity. Governments use tax credits both as a tool to support broad R&D and a targeted public policy to foster innovation in specific fields such as small and medium enterprises, energy, information systems, and others. The main requirement of R&D investment tax incentives should be the systematic innovation activity in the sphere of the scientific and technological progress in terms of scientific or technological uncertainty. The study compares the design features and generosity of R&D tax incentives across innovation developed countries. In general, the choice of R&D tax measures depends on country-level variables such as overall innovation performance and the nature of corporate tax systems. Gradual implementation of the mechanism of investment tax credit in the form of allowances for innovation economic entities is offered. R&D investment tax credit should be given to enterprises that operate in Ukraine. It may be granted for income tax of enterprises, personal income tax and a flat tax. The reduction is made for each tax, which provided for R&D tax credit. The decision to support private R&D through tax incentives is important for innovation development of Ukraine within the context of modern political and economic changes. The design of Ukrainian R&D tax incentives depends on the general configuration of the tax system and the particular policy goals being pursued.