The specialist cites examples from Brazil and other countries, reinforcing the fact that innovation is a significant growth engine, which must always be on the government’s agenda
The success of tax incentive interventions depends on effective program design – and this is a major challenge. Policy makers need to reach a sweet spot on the (maximum) incentive amount, its duration, who is eligible, and whether to target specific companies in the face of significant information asymmetries about what works to drive RD&I (research, development and innovation). ). After all, public resources have run out.
Second Startup ecosystem report (2022), the Brazil it ranks 26th among the 100 countries most committed to transforming innovation into a product or service. The city of São Paulo, on the other hand, showed the biggest leap into the top 20 in its category, occupying the 16th position globally and leading in Latin America – which shows how much effort the state has made to provide the conditions to invest more in RD&I, largely thanks to the partnerships signed between educational institutions and technology parks, which are clusters of young companies with big ideas.
According to the innovation manager of the international consulting firm GAC Brazil, Débora Beraldo, “tax incentives are essential because they reduce the cost of innovation. Therefore, they should correspond directly to a greater innovative effort and lead to products with a greater degree of novelty”. Brazil has at least five tax incentives which help to encourage research and innovation:
- Law of the Good. “The Lei do Bem (Law nº 11.196/05) is a federal law that aims to encourage innovation and scientific and technological research in the Brazilian productive environment. It is a valuable tool for companies operating in the real profit system that seek to increase their business, as it allows the deduction of taxes and contributions on gross income when investments are made in RD&I. the increase in the added value of the production of goods and services”.
- Itinerary 2030. “This tax incentive aims to encourage investment in RD&I related to the production of new technologies, energy efficiency and production process automation in the automotive sector, with an impact on the quality of vehicles and auto parts. Its main benefits are the IPI reduction on the marketing of new vehicles that meet the program’s requirements on energy efficiency and safety, as well as the possibility of reducing up to 15% of IRPJ and CSLL on the amounts invested in RD&I”.
- IT law. “It is an incentive developed specifically for the information and communication technologies (ICT) sector, which grants financial credits to electronics manufacturers who invest in the development of technologies and technological innovation for the sector. Valid until the end of 2029 , this law replaces the reduction of the Industrialized Products Tax (IPI) in force previously through tax credits on Irpef (IR) and Social Contribution on Net Profit (CSLL), based on the total amount that the company invests every quarter in R&D”.
- Ex Tariff. “This incentive grants exemption from import tax for items which have no similar domestic products and which are intended for R&D projects. Therefore, it is applicable to machines, equipment, devices and tools, as well as parts and spare parts, accessories , raw materials and intermediate products without national equivalents. The tax reduction can go as far as zero”.
- Free Zone Information Technology Law of Manaus. “This law grants a reduction and even an exemption from the IPI on the sale of ICT items for companies investing in RD&I in the Manaus Free Trade Zone region. The Manaus Industrial Pole, as the Free Zone is also known exchange, has modern technological devices, hosts a vast production chain, which ranges from leading industries to the production of household appliances, motor vehicles, IT products and more”.
Débora draws attention to what other countries have done to fuel the innovation ecosystem. “To the UKthere are continuous changes in the availability, scope and generosity of tax breaks for development and innovation.” This increase was directly related to the gradual increase in tax credit rates for SMEs.
A nation that remains in first place in the Top 20 countries with the best ecosystem for startups, the WE they have also promoted regular reforms of tax incentives for research and innovation, leading to continuous changes in the availability, scope and generosity of tax incentives. The last change in the US RD&I tax credit structure occurred in 2016, when the FR&E (furniture, equipment, machinery, and plant) tax credit became permanent and a US salaries up to $250,000 to start climbing companies. “The US government understands how important it is to foster an ecosystem conducive to innovation, with all the risks involved. Furthermore, the reduction of red tape in some processes is very welcome for the business,” says the innovation specialist.
Finally, Débora mentions the case of Israel, which “despite being a country of nine million inhabitants (less than the city of São Paulo) and which until recently had to face a chronic shortage of water, has developed a vibrant economy, as well as one of the most dynamic ecosystems in innovation and entrepreneurship in the world with unique attributes”. In that country, there is a high concentration of startups and technology-based companies offering innovative products or services with scalability potential. data of StartBlink, a research center that maps innovation ecosystems around the world, show that Israel has 1,748 startups, an average of one startup for every 5,000 inhabitants. Brazil has on average one startup for every 180,000 inhabitants. “Embedding improvements in the conditions of the Lei do Bem and promoting greater openness to invest in new technologies can also expand the promotion of innovation.”
Website: https://group-gac.com.br
Source: Terra
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