The purpose of this study is to evaluate the effectiveness of government investment tax credit on R&D in the Statute for Industrial Upgrading and Promotion from international comparison and empirical study.
After comparing with the USA, Canada, Japan, France and Korea, we found that Taiwan’s R&D investment tax credit is reasonable in terms of structural design, deduction threshold and credit rate.
In the empirical analysis, using 135 surveyed firms data, the major findings through Linear Structural Relation (LISREL) analysis can be summarized as follows. First, government investment tax credit generates a positive impact on firms’ R&D expenditure. Second, there exists a positive linkage between firms’ R&D expenditure and their products’ value-added. The above two results certainly provide a persuasive reason for governments to continue this incentive scheme. Third, according to firms’ response on major difficulties encountered in the process of R&D are the insufficiency of technology, technicians and capital. Thus, the government may improve its policy effectiveness by helping firms to obtain technology, technicians and capital.
