Summary of fiscal and taxation policies for independent innovation in developing countries

India, Brazil, and China are all large developing countries. Especially, population of India is huge. In recent years, its economy and science and technology have been developing rapidly. Its national conditions have many similarities with China’s. Studying the fiscal and taxation policies for independent innovation of these countries has direct reference to China’s relevant policies. In contrast with the fiscal and taxation policies for independent innovation of developed countries, due to the limited economic development stage and financial resources, the relevant policies of developing countries are not yet mature and perfect.

Developing countries promote independent innovation mainly through fiscal input and taxation incentives, especially the direct relief policies

According to the analysis of policies for independent innovation and technological development in developing countries, developing countries mainly use direct fiscal input or taxation incentives, especially the direct tax relief polities to promote independent innovation, and the role of government procurement in promoting independent innovation has not yet been realized. For example, Sri Lanka grants high-tech enterprises a five-year income tax exemption. The imports of machinery and equipment from high-tech industrial enterprises within one year from the date of registration are exempted from import duties and other turnover taxes. In India, tariffs on computer software imported for export purposes are exempted from import tax, and the import tax on other computer software has also been reduced year after year.

National input is the main method, and enterprises are not yet the main body in an independent innovation system

The success of the innovation system in most developed countries, such as the United States, is that it can effectively stimulate and actively encourage non-governmental innovation and guide and regulate them actively through providing strong protection. However, the input made by developing countries in science and technology innovation is still dominated by the government, and an independent innovation system dominated by enterprises has not yet been formed. For example, the main feature of India’s R&D work is that a large number of R&D activities are concentrated in the government sector, especially in the national research institutes established by the central government and the research institutes affiliated with various government departments to form a government self-development mode with few externalities open or combination with enterprises. Therefore, although the government funds for science and technology are strictly managed in accordance with the budget appropriation and are included in the government budget and monitoring system, the gap between technology and economy and social development is much serious.

The importance offiscal and taxation policies for transformation of innovative achievements is not taken seriously

Developed countries generally attach importance to the fiscal policies in the phase of industrialization of independent innovative achievements, such as implementing government procurement policies on independent innovation products and subsidizing policies on the ownership and transfer of patents, and strongly support the independent innovation of enterprises and reduce the market risk of enterprise innovative technologies and products. Compared with developed countries, most developing countries did not attach great importance to fiscal and taxation policies during the stage of industrialization of independent innovation, and most supportive policies for independent innovation focused on direct tax relief.

The effectiveness offiscal and taxation policies for independent innovation needs to be improved

In developing countries, due to the imperfect policies, the low level of financial management, the lack of detailed budget, the strict performance appraisal, and so on, the effectiveness of fiscal and taxation policies fort independent innovation has not been fully realized. This is reflected not only in the use of budgetary allocations, but also in the tax incentives and other policy instruments. It has been reported that more than 20% of India’s science and technology budget for 2005-2006 has not been capitalized due to the lack of a clear and detailed budget and the use of technology funds. There is also a problem of inadequate allocation of funding for science and technology in Brazil. The budget allocation for 2006 was 1.803 billion Brazilian reais but the actual allocation was only 710 million Brazilian reais, and the funds for science and technology were diverted to infrastructure construction. For some countries that implement government procurement, the operability of their specific policies also needs to be improved.

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