This study identifies issues within the current tax system, so as to seek ways to address the issues, as well as support investments in research and development (R&D).
Investments in R&D have drawn attention recently because the size of the investments can serve as a quantitative index to efforts towards technological development. It will be difficult to expect technological innovation in the future without well-organized investments in R&D. In particular, it is impossible to achieve technological innovation in areas of cutting-edge technology without well-organized investments in R&D. Even when a technology is introduced from another country, Korea's own R&D efforts are necessary to adapt the technology to meet local needs. It is only recently that the government and the private sector have started to realize the importance of investments in R&D, which has resulted in discussion of a wide variety of incentive policies to increase investments.
This recommends the following measures to address the issues of the current system: First, R&D support should be excluded when the total limit on tax support, as well as the regulation regarding excluding duplicate applications, as applied in enforcement of the Act on Regulation of Tax Reduction and Exemption. Second, Korea's tax credit method should be changed. Third, the technology development fund system must be abolished. Fourth, the tax credit system should be improved. Fifth, the special rate of depreciation should be adjusted to 100 percent from 50 percent. However, all of these measures (except for abolishment of the technology development fund system) are expected to put a financial burden on the government, and so are difficult to implement.
Studying the other countries' support systems shows Korea provides below-average support for R&D. Other nations' support seems more effective because, unlike Korea, they don't provide diverse support through tax credit. In other words, support becomes more effective when companies try to make investments on a variety of areas with limited resources and give preference to investments in R&D. As a result, this means of support is less effective in Korea, as there are already several types of support systems in the country.
Most of the finance provided to support technological development is focused on corporate efforts to make new technologies commercially available, or investments in facilities to manufacture new products, rather than on support for investments in current R&D. Therefore, we should seek ways to increase effective financial support for investments in R&D, and ways to improve financial systems to diversify risks posed by technological innovation.
연구개발투자와 세제상의 유인정책(Investments in R&D and incentive policies of tax system)
서울 : 한국개발연구원
|Series Title; No||정책연구시리즈 / 84-08|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||KDI; KDI School|