Tax Breaks Replacing Direct Public Funding Of Innovation
A new OECD study shows a trend away from direct public funding to stimulate innovation and toward providing tax breaks instead.
According to the OECD Science, Technology and Industry Scoreboard 2007, two thirds of the 30 OECD member countries offered businesses tax subsidies in 2006, up from 12 in 1995, and most have tended to make it more generous over the years.
Direct government funding financed an average of 7% of business R&D in 2005, down from 11% in 1995.
Spain, China, Mexico and Portugal provide the largest tax subsidies and make no distinction between large and small firms. Canada and the Netherlands on the whole continue to be more generous to small firms than large ones. Emerging economies, including Brazil, India, Singapore and South Africa, also offer a generous and competitive tax environment for businesses investing in R&D.
The type of tax subsidy available varies from country to country but includes an immediate write-off of current R&D spending, as well as tax relief or allowances against taxable income. International co-authorship of scientific publications tripled between 1995 and 2005. Cross-border co-operation on inventions nearly doubled as a share of total inventions worldwide between 1991-93 and 2001-03.
Foreign ownership of domestic patents increased by 50% between the early 1990s and the early 2000s. European Union countries interact most often with each other and are less globalized than the United States, while Japan and South Korea are less internationalized overall, the report finds.
In addition to new data on the rising investment in knowledge by emerging economies, this edition of the Scoreboard shows that:
- R&D spending in OECD countries has increased steadily in recent years although more slowly than during the second half of the 1990s.
- The number of business researchers has grown most rapidly in smaller OECD countries, such as New Zealand, Portugal, Spain, Iceland and Greece, where their number has grown by 10% a year over the past decade.
- The US and emerging economies, notably China, India, Israel and Singapore, focus their innovative efforts on high-technology industries, such as computers and pharmaceuticals, while continental Europe concentrates on medium-high-technology industries, such as automobiles and chemicals.
- The number of biotechnology patents has been falling since 2000 in most countries, after a sharp increase in the late 1990s, largely due to the more restrictive criteria applied by patent offices and the end of the wave of patenting that followed the decoding of the human genome.
- 80% of South Korean households have high-speed broadband access, the highest in the OECD. In 2005, Korea reported the highest surplus in the ICT goods trade balance, followed by Finland, Hungary and Japan.
A summary of the OECD Science, Technology and Industry Scoreboard 2007 can be downloaded free of charge. The full report is available for purchase.
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