TAX INCENTIVES AND THEIR ROLE IN RESEARCH AND DEVELOPMENT
– Nivruthi Tumu Reddy
Jindal Global University
Abstract
Research and Development (hereinafter referred to as R&D) is a term covering threeactivities: Basic research, applied research and experimental development.1 These regulate one aspect of the market behaviour as they encourage innovation based economies. Of late, countries around the world have shown profound interest in investing in R&D to promote domestic growth and international relations. Each of these countries have a unique tax system modulating its performance, and the tension between the kind of incentives the system provides and research and development is still an eminent issue2. This paper seeks to analyse, firstly, the basic structure of tax incentives for R&D and secondly, the role of tax incentives in R&D specific to India, its optimal outcome on the Indian market, features, requirements and any recommendations if necessary critiquing the existing model in the technological industry sector. Furthermore it draws a comparative narrative between different tax incentive systems from around the globe to promote and progress the growth of R&D.
Universal Anatomy of Tax Incentives
“Taxation is a government’s monopolistic power which unavoidably distorts market efficiency”.3 Tax incentives are used as a medium to reduce taxes and promote market growth by inducing businesses and individuals in exchange of desirable functions on their parts.4 In other words a tax incentive can be referred to as a form of Douceur. This is denoted as an incentive as it helps in ‘mitigating a market failure associated with the
1 Research and Development- OECD, https://stats.oecd.org/glossary/detail.asp?ID=3111
2 ISS 1936-5357, Harvard, John M. Olin Centre for law, Economics, and business fellows’ discussion paper series: Integrated tax policy approach to designing research tax benefits, by Noam Noked, Discussion paper no. 57. 06/2014, MA 02138
3 Can Research and Development Tax Credit be Properly Designed for Economic Efficiency?- Jason J. Fichtner and Adam N. Michel, Mercatus Research
4 Section 3. Using Tax incentives to support community health and development, what are tax incentives? http://ctb.ku.edu/en/table-of-contents/implement/changing-policies/tax-incentives/main
externality of certain economic activities’.5 Under this purview only those activities are encouraged which are most beneficial to the society as a whole.6 Targeting and providing the business and individualised sectors7 with a tax break is considered crucial to promote national or regional economic growth.8 Availing this form of incentive increases the value of goods and services, which in turn helps in the growth of income derived from that production.9
Research and Development is one area which every country, on one hand wants to
overly exploit as it promotes economic growth derived by innovation and technology, 10 however on the other, to invest in it is what every country fears, as it does not guarantee the long run growth of economies rather it has the tendency to produce uncertain outcomes and reluctant disclosures.11 Most governments use tax incentives in order to facilitate and inculcate research and development in different sectors of market, as then companies don’t hesitate in investing their share after being subsidised by the government.12 Research and development as a tool is chosen to keep to the market functional and to revise it with changing times. From more than a decade, more countries are using tax incentives for R&D as the schemes outlined by the government have become more generous.13
General Structure of The R&d Model
The OECD innovation policy platform lays down a structural process for R&D. It avails the government a choice between grants or procurement and fiscal incentives. For sustenance of R&D more than 20 OECD governments provided tax incentives14 in the
5 The Framework for assessing tax incentives: A cost-benefit analysis approach, by Duanjie Chen, research fellow, School of Public policy, university of Calgary, New York, 23-24 April of 2015
6 Supra 3
7 According to a CCTV (China Central television) news report (http://news.cntv.cn/special/tan/11/0519/), the medium of providing a tax break to preferential tax payers violates the ‘equity principle” as when everyone are falling within the purview of the tax system, these preferential tax payers aren’t treated on their ability to pay rather they are given economic significance by policy makers to facilitate market growth. However positive impact this has on the market, it still draws a line of equity within the integral system of tax law.
8 Supra 4
9 Importance of tax incentives, tax revenue and stabilization interim committee, October 25, 2011
10 Supra 3, page 3
11 R&D tax incentives, rationale, design and evaluation, OECD, November 2010
12 Supra 8
13 Supra 3, page 3
14 There is a difference between a tax incentive and the general tax structure as a whole. When a ‘selected group of tax payers’ are provided with preferential tax treatments, it falls within the purview of the tax incentive, as these groups are leveraged to perform a certain activity. However when a ‘tax provision’ ranging between different levels of allowances is universally applicable regardless of other factors associated to them, then it becomes a part and parcel of the general tax structure.
form of fiscal incentives, which is a hike from 12 countries in 1995 to 18 countries in 2004.15 Now why are the governments promoting R&D? Developed and Developing countries not only endorse their economic growth to elements in the short run, but rather look for elements in the long run they can associate with. Research and Development is one such element which a) quantifies and ensures growth in the future through invention of innovation policies and b) promotes national competition.16 To fulfil both the above requirements the governments of these countries need to leverage their markets to invest in the business of R&D and a form of leverage is tax incentives or benefits.
When a country’s tax code enables a tax incentive, it encourages and incentivizes its economic activity.17 These incentives are not only attributed to a specific group rather they are industry, region and firm-neutral.18 These groups use tax incentives for R&D as a form of augmentation. For any firm/company to exist in a competitive market, changing innovation and technology is a crucial element as they have to strive constantly to be at the top of the market. When a tax incentive or benefit is provided for promoting research and development a company can either reduce its tax liability or
provide itself with a sizeable cash rebate.19
Such inflow of cash incentivizes the
company to promote and better its technology rather than incurring overflow of resources resulting in heavy tax costs.20 For any corporate company, the tax incentives can be of two types, firstly credits which enable direct deduction from the tax payable and secondly allowance which enable deduction from the taxable income.21
Of late countries have been adopting R&D as a mechanism to promote their economic activities. This internationalising has made tax incentives more generous and helped in promoting its growth in terms of investments. However such investments are performance based i.e. up until the company is socially optimal to do so.22 In simple words, a company’s R&D activity is pertinent only until when a company’s rate of return in terms of social acceptance is higher than the rate of return privately earned by R&D.
15 OECD innovation Policy platform, R&D tax incentives: rationale, design, evaluation
16 Market Mechanisms: understanding the options, http://www.c2es.org/publications/market-mechanisms- understanding-options
17 Supra 3
18 Tax agenda for tech companies by Steve Clarke, http://www.indiaincorporated.com/item/4375-tax-agenda-for- tech-companies.html
19 Ibid, at page 2
20 ibid, at page 4
21 Supra 3, at page 1
22 Ibid, at page 1, In addition to that, when a company is considering an R&D and seeks tax incentive it requires attributes such as target group, what kind of activities it wishes to perform to claim that tax credit etc.
Therefore for a company to accept a tax incentive to invest in R&D there exist several variables that it must consider. One of the most predominant of these factors is the fiscal environment the company is established in, as if the tax rate of a country is lower in comparison to the tax incentive it is receiving then the framework of the tax incentive
system for R&D is less effective.23
Secondly, a company evaluates as to what
expenditure the R&D falls within, whether it falls under the purview of wages, process or capital.24
According to a simulation of R&D incentives in the European Union, the preferment of research and development has been prominent in various countries broadly in two ways: firstly where universities are raising public funds in order to raise performance of R&D which are interlinked by technology transfer and secondly where R&D is promoted via market signals and competition to bring potential distortions to its minimal level25 and maximising compliance costs on parallel platforms.26
Under the European Union, tax incentives as a part of R&D are said to be neglected due to various reasons. First out of this is “the lack of liquidity”27 it provides. A company’s disablement in raising its cash flow can be rectified by the inflow of R&D. Secondly, the bar and limitations R&D thrusts on its own growth and lastly, as R&D is applicable to firm specific, the expenses incurred also remain firm-specific which reduces the intensity as to till what extent these incentives can be used within a period of time.28
A company can choose between two types of tax credits for R&D, firstly level based incentive which evaluates the amount of research and development taken by the company and appropriates sufficient credit with respect to that amount undertaken and secondly, increment based incentive which analyses research and development of the
23 Ibid, at page 1, Wages related to R&D promotes investment in human capital, secondly expenditure evaluates the process of R&D and lastly capital enlarges the incentives for companies.
24 R&D tax incentives by Pierre Mohnen, Innovation for Growth-i4g- Policy brief, https://ec.europa.eu/research/
innovation-union/pdf/expert-groups/i4g-reports/i4g_policy_brief 25_-_brief_RD_tax_incentives.pdf
25 One advantage of R&D tax incentives is that it ensures that the composition of it is not startled rather it is provided on an equal platform to ensure a raise in its development by availing it to both small and medium-sized enterprises. “Moreover the strains faced by SME’s due to asymmetric information are least partly mitigated by tax incentives”
26 Evaluation of Tax incentives for Research and Development in Germany by Christ of Ernst, Chapter 4- What the
design of an R&D Tax incentive tells about its effectiveness- A simulation of R&D tax incentives in the European Union, page 35
27 Ibid
28 Ibid
company for the last few years as required and then proportionately increments the expenditure for R&D.29
When a company expends for R&D using tax incentives, the kind of production embodied undoubtedly persists the incentives but also denigrates the provisions of the tax code of the country.30 Are tax incentives a productivity miracle or media hype?31 Such a statement definitely hinders the entire framework of tax incentives for R&D. One of the major critiques of this framework is that although it projects endorsement of economic growth it doesn’t ensure it. In other words the rate of investment into R&D doesn’t always fall parallel to the rate of return it has to offer. As R&D has to do with the long run, its outcome is not inevitably supportive to the economic growth, it may vary in terms of wage effect, asymmetric information which are also the reasons for market failure. The irony here is that the rationale in introducing tax incentives for R&D rested on the existence of market failures.32
Tax Incentives in the Indian Context
India is a developing country which shows ardent interest in R&D. The government of India mainly focuses on the science and technology field and promotes R&D in the same as it believes it promotes growth at a faster rate. In the year 2013 the government has launched a program which encapsulates objectives for the growth of R&D.33 In India for funding R&D activities in the technological sector the projects must be approved by the Technology Development board which is run by the Technological Development
program.34
In the Science and Technology policy of 2003, India stated that ‘the
government targets the expenditure on Science and technology to be about 2 % of GDP’ which is majorly contributed by ‘the industry through significant increases in Industrial R&D, both inclusive of the technological and pharmaceutical sectors.35
29 Tax incentives for innovation: Productivity Miracle or Media Hype?- by Eileen L. Collins, Journal of Post Keynesian Economies, Vol. 4, No. 1 (Autumn, 1981), pp. 68-74, published by: Taylor & Francis, Ltd.
30 Ibid
31 Supra 12
32 Worldwide R&D incentives reference guide, 2013-2014, http://www.ey.com/Publication/vwLUAssets/ EY__Worldwide_research_and_development_incentive_guide/$FILE/EY-Worldwide-RD-incentives- reference-guide-2013-2014.pdf
33 Ibid
34 India’s software Industry by Subhash Bhatnagar, Indian Institute of Management Ahmedabad, http://www.iimahd.ernet.in/~subhash/pdfs/Indian%20software%20industry.pdf
35 Financing of Industrial innovation in India, How effective are tax incentives for R&D? by Sunil Mani, Centre for
Development studies, Int. J. Technological learning, innovation and development, Vol. 3, No. 2, 2010
Tax incentives in the field of R&D in India although trying to be prominent are still persistently small with minimal increase over the years. Moreover this can be determined by the service rather than the end product as the product in itself would require greater investment of R&D.36 As India is a developing country, for a long term project and analysis, it lacks the resources and expertise, as to enter into national competition at such a stage with unfamiliar markets, or familiar yet distant markets, is a cost to its development, hence most firms remain reluctant to spend even the minimum
incentive into R&D.37
Nevertheless, this is subjective to the small and mediocre firms,
as multinational companies and the bigger firms still step ahead to invest in R&D to promote innovation, as for in such firms the risk of investment in product development is comparatively lower than the small and mediocre firms. In India the kind of tax incentives provided to promote research and development in the small and mediocre firms is mainly done through soft loans, free funds or incubator centres.38 These are subject to separate schemes as provided by the state and central governments.39
India offers both intramural and extramural tax incentives which broadly cover input based and output based for research and development, amongst which there is one input based tax incentive which provides weighted deduction of 150% on any expenditure on intramural R&D, which is considered most popular amongst the lot.40 This was founded in 1998 and ever since was applicable to almost 10 different types of industries; however the agriculture sector was not added until budget for the fiscal year 2008 to 2009 was released.41
In India the corporate tax rate is at 30%, and to qualify for R&D under such tax rate includes wages, supplies, utilities and other expenses directly related to R&D.42 For example distinct from the technological sector, the pharmaceutical sector as a part of its R&D is attempting to promote its stake in business to foreign companies and this draft
36 Ibid.
37 2014 Global survey of R&D tax incentives, by Deloitte, file:///C:/Users/Nivruthitumu/Desktop/ Semester%209/Economics/articles%20for%20paper/dttl-tax-global-rd-survey-aug-2014.pdf
38 Making India a preferred R&D hub, by Naveen Aggarwal, March 13 2012, the financial express-
http://archive.financialexpress.com/news/making-india-a-preferred-r&d-hub/922866
39 In India most small and mediocre firms use research and development centres of other company for hourly basis with nominal costs.
40 Supra 35
41 Ibid
42 Supra 37
proposal for the drug and its R&D is partly funded by the government that is in the for tax
incentives.43
The government of Indian indulged in such a proposal to promote
development and national competition. Such a proposal widens the gap for newer drugs and pharmaceutical technologies between the countries signatory to the proposal, being most beneficial to India.44
Tax incentives for R&D in India are currently in the form of either weighted/accelerated deduction for expenses as it is a developing country.45 Currently the policy of tax incentives in India enables tax benefits for those expenses incurred on R&D that are aroused and incurred in India. However those Companies which are multinational have transaction overseas, still will be provided with incentives if the expenses incurred are within the territory of India.46 This in a way disables the larger companies to access R&D with flexibility.
Moreover a lot of firms are unaware of the fact that the government actually subsidizes the expenses incurred on R&D as a form of tax incentives. For example, companies are unaware of the fact that the government of India provides a weighted tax deduction @200% on expenditure incurred on approved in-house R&D facilities of companies as per the section 35(2AB) of the Information Technology Act.47 The lack of awareness in India of most existing laws is also a major logjam in accessing these R&D tax incentives.
The Indian government in the electronics hardware sector has been relentlessly taking steps to condense the total taxation level to promote better production of products and stipulate interest in R&D. In order to do the same the government has reduced the general rate of excise duty to 8%, sales tax to 2% and VAT on IT products to 4%. 48 India offers a variety of tax incentives both intramural and extramural which can be further divided into input based and output based.49
43 Ibid
44 Take advantage of R&D credits any which way you can: Global, Federal and state, November 10, 2011, http://www.alvarezandmarsal.com/take-advantage-rd-credits-any-which-way-you-can-global-federal-and- state
45 http://blog.ficci.com/innovation/5894/
46 Ibid
47 Department of Electronics and information, Ministry of Communication & IT, Government of India- Industry Promotion activities, http://deity.gov.in/content/industry-promotion-activities-dpl-industyactivities
48 Financing of Industrial Innovation in India, How effective are tax incentives for R&D? by Sunil Mani, Working
paper 405 of August 2008
49 Ibid
In the year 2001, targeting the technological based industries treatment for R&D had slowly taken an upward curve, however the findings of it end with setting of the framework during that year as there or no studies depicting the effectiveness of these incentives.50 Nevertheless, in India the promotion and functioning of R&D is carried out mostly by the government and public sector which further motivated the business enterprises to invest in R&D. The same reflects in the outcomes, as for 2015, the same sector accounts for about 20 percent of the R&D.51
One evidence that proves the effectiveness of tax incentives for R&D in India by the methodologies used by Hall and Van Reenen (2000) and Mohnen (2007) which is based on the experience of the OECD countries.52 However their conclusion to the tax system is that “a dollar in tax credit for R&D stimulates a dollar of additional R&D”.53 In India tax incentives for R&D are stipulated in a manner proportionate to the expenses that are incurred as it manifests itself as “an immediate write-off or expensing.54 “The Software Technology Parks of India” provide a 10 year 100 percent income tax exemption, only through 2009, on export profits and for onsite services.55 This provision also avails an exemption from excise duty on domestic purchases of capital goods and central sales tax in relevant cases (hardware and software) which enables an option for the taxpayer to choose between “a complete tax holiday or on all other tax concessions56 available under the information technology act.”57
Specifically for SEZ (special economic zones), a key incentive has been established in India which provide a 15-year income tax holiday under which the first five years for qualified companies are completely tax free, the next five year period has 50 percent exemption and lastly the third five year period is availed a 50 percent tax free depending upon the amount of profits that have been reinvested.58 This provides companies with flexibility in adopting research and development. In fact as this stands more beneficial than what STI offered companies under the STI scheme are looking to convert to the SEZ incentives unless the STPI provide extended incentives.
50 Ibid
51 Ibid
52 R&D Cash back for loss making SME’s
53 Supra 35
54 Ibid
55 Practical guide to Research and Development Tax incentives, Federal State and Foreign, by Michael D. Rashkin, page 562
56 Not only software development but all activities related to electronic hardware for export, consultancy fall within
this purview.
57 Ibid
58 Ibid, page 563
However in India it is a matter of concern to the government with the revenue foregone as a part of tax concession. From the beginning of Union budget of 2004-2005 up until 2007-2008, the government’s computation on the revenue foregone as a result of tax incentives negatives the growth rate up to 45.36 percent in 2006-2007.59 An effective tax incentive varies accordingly as per its tax rate. The incentive might be neutral across the target industries however the effective rate varies according to whether the firm or the industry has actually taken advantage of the leverage granted.60
Nevertheless, since economic liberation, there has been constant advancement in India with respect to its preference in research and development and the kind of tax incentives which assist it. Although this development is measurable, it is steady and progressive, with an adaptive concealment to it.
Comparative analysis of the Various R&d Incentive Models
Germany
Germany is considered a hub for Europe’s R&D leaders and in 2003 it spent over 2.55 percent of its GDP on research and development.61 It unlike other countries solely relies on direct subsidies by the government to promote R&D, than any special credits and allowances.62 These subsidies mainly are in the form of cash grants which awarded on per project basis.63 Although tax incentives are not yet a part of the R&D program, the
government still grants64 from taxable profits”.65
“100 percent of non-capital R&D expenditures to be deducted
China
The communist party of china promotes research and development in the form of tax deduction and reductions in enterprise income tax rates.66 Furthermore it offers 150% super deduction for eligible research and development expenditures.67 With respect to
59 Ibid
60 If for instance a R&D project is provided with incentives to a target group of industries, the effective rate applies to those industries which choose to avail of the incentives applicable. This in a way promotes competition but restricts growth.
61 Supra 55, page 564
62 Ibid
63 2014 Global Survey on R&D tax incentives, by Deloitte, Page 17
64 Ibid
65 Supra 55, the tax incentives as part of R&D are opposed by the Association of German Chambers of Commerce and Industry as they believe such incentives do not foster research and development. The government is focusing on overall structuring its tax structure to reduce the burden of tax on the industry.
66 Supra 63, page 10
67 ibid
the technology/software companies`, the EIT (enterprise income tax) exempts any income of 5M RMB from qualified technological transfers and any income in excess of this is taxed at 50% reduced EIT rate, newly established software companies are granted tax holidays are granted business tax exemption on qualified income and so on.68 Furthermore nay losses that are incurred from these tax incentives which are attributable to R&D are eligible for super deduction claims which are carried forward up to 5 years.69
Austria
Austria had planned to reach an investment of 3 percent GDP for research and development in 2010 which is on par with the Lisbon target.70 It vigorously promotes funding R&D through programs and majorly through tax incentives. In 2004, in terms of its tax policy it enacted a tax reform that minimised the corporate tax rate to “25 percent and expanded tax incentives for R&D”.71 An incentive called the Research I allowance enables a 125 percent R&D deduction which encourages companies to promote and raise their levels of R&D spending, by increasing deduction to 35 percent for a period of 3 years in its incremental expenditures exceeding the average R&D expenditures.72 In 2014 the nature of tax incentives for R&D included a “10 percent volume based credit on all qualified R&D related expenditures”.73 However the approval of quantity and quality of the eligible industries for this incentive lies within the Austrian Research promotional organization. Once the tax credit is approve, the tax loss or the low profit position of the company doesn’t remain under question anymore as the benefit incurred is refundable till the “extent the credit exceeds the amount of tax liabilities”.74
France
France offers R&D tax credits which are volume based and that can be carried for three years.75 This is done to expand the amount and utilization of innovation.76 A form of tax credit it avails is “a 30 percent of the first 100M of qualified R&D expenditures incurred during the tax year with an additional 5 percent in excess of the 100 M threshold and
68 Ibid
69 Ibid
70 Supra 55, page 544
71 Ibid, also a part of the Austrian Research and Technology Report of 2004
72 Supra 55, page 545
73 Supra 63, page 3
74 Ibid, the eligibility in approving tax incentives is not restrictive or constrained to one particular industry. In approving the industry the organization looks at the definition of R&D as specified by the OECD which makes software development also a part of this approval process.
75 Ibid, however if this benefit is not availed within the three years the tax payers are not entitled to any refunds.
76 Supra 55, page 560
secondly.”77 The first of France’s tax credit for R&D was found in 1983 when its GDP was moderately low. The purpose of this credit was to stimulate economic and market growth by promoting both R&D expenditures and its involvement in the companies.78 Progressively the law reached a point where the tax credit was divided amongst two years, first which equalled fifty percent of research and development costs in comparison to the current year budget and second which equalled fifty percent of the difference between the current year and the previous year.79 This furthermore changed with time and is a process that is continuously evolving itself.
Japan
In 2003, Japan spent over 3.2 percent of its GDP on research and development,80
which
shows that it recognises the importance of research and development for its economic growth. However it laid down the perfect example as to how R&D solely cannot form the foundation of innovation as a result to which apart from availing tax incentives, Japan is looking for alternative strategies to “modify cultural impediments to innovation”.81 However, Japan has been prominently active in the area providing tax incentives for R&D expenditure and this was ushered by its tax reform in 2006. This availed a three year82 tax incentive period which was calculated out of the five year credit period of the companies/industries. However to qualify as eligible for a tax incentive, the company’s/industry’s credit year must “exceed the R&D expenditures either for the year prior to the credit year or the year prior to that”.83
Canada
The primary target of Canada was to be amongst the top five countries that contribute to R&D performance and was to double its performance from its previous years by 2010. The tax policy regime of Canadian federal government allows a deduction and 20 percent tax credits for “Scientific research and experimental development” (SR&ED) .84 The Canadian government is said to provide the most “lucrative research credits in the world”,85 however changes over the period of time have curtailed its incentive facilities.
77 Supra 63, page, 15
78 Supra 55, page 560, in 2004 this form of tax credit was changed from a purely tax incremental credit to an inclusive of incremental and volume credit.
79 Ibid
80 Supra 55, page571, It’s an intensity that is the third highest according to the rankings of OECD.
81 Ibid
82 The three years were the most R&D spending periods.
83 Supra 55, page 572, “however the credit could not exceed 12 percent of the tax due”.
84 Supra 55, page 549,
85 Supra 63, Page 8
Canada as a country under OECD, adheres to its definition of Research and Development before qualify a project for incentivising tax benefits.86
However there exist credits which are refundable, those credits which are provided to the small and mediocre private corporations. The tax credits which are provided to this corporation are for the first 3M expenditures each year.87 For any of this corporation to be eligible, they must a minimum of 800K taxable income and less than 50M taxable capital in their prior year.88
United Kingdom
In the United Kingdom, the small and medium sized enterprises (SME’s) although reluctant in investing in R&D, in loss made a benefit in procuring these tax incentives available for R&D. For the longest time the movement for the tax credit has been downward, however in 2014, with a hike from 11% to 14.5% the SME’s found a path in recovering their losses.89
Conclusion
Research and development acts as a significant contributor to forefend market failures. Technology is required to change with accelerating times, and for companies/industry’s to be a part of this globalised and competitive world, they require the innovation and capacity to keep up with it.90 Tax incentives as an initiative by the government plays a key role in sustaining this sector of research and development. For any country to endure in the global race of this innovation hub, the policies holding research and development must be contained and strengthened within as these develop changing products and technologies. One such policy within this confinement, as specified earlier is tax incentives which assist in promoting global standards through research and development.91
86 Ibid
87 Ibid
88 Ibid, however there is an annual cap on refundable credits, but there exists no cap on the total amount of non- refundable costs available through R&D tax incentives
89 Supra 48
90 Opportunities and Challenges for Sustainable R&D in India, Avinash Patil, Subrata Biswas, Ird India, http://www.irdindia.in/journal_ijrdmr/pdf/vol3_iss1/1.pdf
91 Ibid
India and other countries around the globe have elastic and a fine target to promote and establish research and development with changing times. As R&D is considered as a tool to enhance innovation and develop effectiveness of markets. Although R&D doesn’t provide stabilised and conclusive outcomes in the future, there is still a scope of advancement. Moreover utilisation of R&D for short term growth provides it with an evolving structure to adapt to changing times with changing requirements of the markets and the players in it. It further prevents any “bureaucratic delays or difficulties in the actual administration of tax incentives” ,92 as the company’s/industry’s use these benefits as and when they are availed.
92 Financing of Industrial innovation in India, how effective are tax incentives for R&D? by Sunil Mani, Int. J. Technological learning, Innovation and development, Vol. 3, N0.2, 2010