File(s) under permanent embargo

Comparing R&D tax regimes: Australia, Canada, UK and US

journal contribution
posted on 2017-01-01, 00:00 authored by Mark Smith
This article does two things. It explores the definition, classification and categorisation of tax incentives, at a general level,
and it compares how four global leaders target their R&D tax incentive regimes. The latter is an exercise in comparative
tax law focusing on the R&D definition and the incentive’s operational details. It observes that the R&D definition is used
by all of the regimes as a gateway to the relief and to curtail the scope of the relief by restricting R&D to "new scientific
knowledge", where the US interprets "new" to mean new to the entity, whereas the UK, Australia and Canada, interpret
"new" to mean new to the world. Thus, the US regime arguably focuses on creating and sustaining the competitiveness of
its domestic firms by subsidising "knowledge acquisition" rather than "knowledge creation". It also observes that: whilst the
US and Canada subsidise incremental improvements in new scientific knowledge, the UK and Australia do not, insisting
instead on "substantial advances"; only the US uses an incremental credit, which arguably serves as a means of limiting
the cost of this tax expenditure to the US Treasury, particularly given the broad scope of its R&D definition; none of the
regimes respond to the consensus on the need for specialisation, adopting as they do a broad-brush approach to subsidising
technological innovation; and by focusing on experimentation or scientific method, all of the regimes leave out a large area
of potentially innovative and productive commercial activity (that is, commercial product development using an iterative or
"trial and error" methodology).

History

Journal

British tax review

Volume

2017

Issue

1

Pagination

34 - 59

Publisher

Sweet and Maxwell

Location

London, Eng.

ISSN

0007-1870

Language

eng

Publication classification

C1.1 Refereed article in a scholarly journal; C Journal article

Copyright notice

2017, Thomson Reuters

Usage metrics

Categories

Exports