IMPROVING TAX INCENTIVES FOR INNOVATIVE ACTIVITY IN UKRAINE

• Main Author: Y. Matishchak
• Format: Article
• Language: English
• Published: LLC "CPC "Business Perspectives" 2014-09-01
• Series: Економіка розвитку
• Subjects: innovation development; innovation activity; tax incentives; investment tax credit
• Online Access: http://www.ed.ksue.edu.ua/ER/knt/ee143_71/e143mat.pdf
• ISSN: 1683-1942; 2304-6155

Innovative activity plays a key role in ensuring sustainable economic growth, implementation of technical and economic modernization of the economy and enhancing its competitiveness. It is necessary to improve the system of the intensification of innovative activity for efficient use of the existing potential of innovation development of Ukraine's economy. State innovation policy uses a wide range of tools for its development, among which there are the government funding, subsidies, grants, subventions, government contracts, tax rates, depreciation rates, and others. But due to the limited financial resources, preference should be given to the tools and levers of tax policy. The current state of innovation activity in Ukraine is determined by science experts as critical. The reasons for this is the depreciation of fixed assets, poor innovation infrastructure, insufficient state support of innovative enterprises, commercial risk of doing innovation. The results of the analysis of foreign experience have shown that fiscal instruments of innovation are used in most countries of the world. The scope of their uses in Ukraine is considerably limited. With a view to intensifying the innovative activity it is desirable to amend the Tax Code of Ukraine and introduce an innovative tax credit (ITC). Its essence is in the reduction of the tax liability of the of profit tax payer by some part of the costs associated with investment activity, or full-size. It will enable businesses to reduce costs and increase profits. The size of the ITC should not exceed 50 % of the size of the accrued profit tax that will keep a stimulating effect and prevent significant budget losses. When deciding on the implementation of the ITC it would be appropriate to fix the objects of the impact of this tax credit in the country's legislation, as well as take into account the extent of innovation activity of enterprises. It should consider the payback period of the innovation project in determining the term of the ITC, but it should not exceed 5 years. Another fairly common tax tool of the intensification of innovative activity in Western Europe is creating a tax-free allowance of profit. The essence of the tool is to exempt some company's profit from taxation through its enrollment in non-taxable reserves to finance innovation. The proposed tools of innovative activity tax incentives could enhance it in Ukraine, create a favorable investment climate, which will be a major achievement of state regulation of investment and innovation processes.