Fiscal incentives for Research and Development
Innovation is an important driver of growth and investments in R&D stimulate innovation. Many governments encourage investments in R&D with the purpose of addressing market failures. In Belgium there are corporate tax measures, a tax exemption for additional staff, a tax reduction on the withholding of wages of researchers, accelerated depreciation for investment in research and a patent system. An accessible and transparent fiscal policy for R&D is based on two complementary pillars which each focus on a specific type of R&D expenditures. The first pillar would then focus on R&D investments and expenditures on the purchase of patents, while the second pillar relates to the labor costs of researchers.
We advocate a regular evaluation of the innovation support in our country considering the increasing importance and the budgetary costs. Criteria that should not be overlooked include simplicity, transparency, predictability and low administrative burden. The current measures often fall short in terms of usability. Especially the measures in terms of the (partial) exemption from withholding tax for R&D personnel from List 1 (Doctor of exact or applied sciences, doctor of medicine or civil engineer) appear to have a clear effect. Additional means could be prioritized towards this type of measures. There is a clear need for coordination between the regions and the federal government over the whole of the granted government aid. A choice between the tax credit and the increased investment deduction seems to be obtrusive. It may be useful to no longer limit the measure to R&D investments with an environmentally-friendly character (but for instance only for the purchase of patents and investments for R&D). As a conclusion we should focus resources on what works best, but also move on to higher amounts to generate a more significant impact. Finally, it is imperative that attention be paid to possible interactions between tax incentives and other policies to promote R&D and innovation.
