A Study on the R&D Related Tax Incentive Policy

It has been about 37 years since R&D related tax incentive policy was first enforced in 1966. The level of R&D expenditure has increased rapidly by the efforts of the enterprises and the various tax incentives of the government. This study reviewed the tax incentive on the R&D and the status of R&D in our country, and suggested some recommendations which will increase the effectiveness of the tax incentive system. R&D activities in our country are very active. The growth rates of R&D expenditure and the rates of R&D on the GDP are similar to those of the advanced countries. But the history of R&D is very short and the absolute amount of R&D is still small. We dont have sufficient core technology which has global competitive. It is necessary to support the R&D of the firms continuously. To do this, this study suggested followings: the abolition of unfavorable tax treatment to the large firms, extension of tax incentive on the R&D in recession, simplification of tax incentive system and procedure. Because a great portion of our R&D activities are made by the large firms, it is necessary to enlarge the base of technology and encourage the R&D activities of the small and mediumsized enterprises. This study suggested followings: the preferential application of minimum tax to the technology-intensive firms, reenactment of income deduction to the R&D human resource of small and medium-sized firms, tax incentive on the cooperative research between large firms and small and medium-sized firms