Olena Liakhovets

PhD, Assoc. Prof.

Department of Economic Sciences

Petro Mohyla Black Sea State University

E-mail: o.liakhovetz@gmail.com

TAX INCENTIVES EFFECTIVENESS FOR THE INNOVATION ACTIVITY OF INDUSTRIAL ENTERPRIZES

IN UKRAINE

ABSTRACT. The paper is devoted to the investigation of the effects of tax advantages on R&D. An analysis of earlier studies reveals that most authors argue that national programs of R&D budget funding and tax benefits have stimulating impacts. None of these studies have empirical support that shows the direct relationship between taxation incentives and the impacts of innovation programs. We tried to verify this relationship statistically, but obtained no meaningful results. The research was complicated by the absence of any statistics concerning the value of tax advantages for R&D in Ukraine. Using approach of Grytsenko (2008) to mathematical modeling of a company’s tax burden in Ukraine we determine the effect of profit exemption and some economic transactions exemptions from taxation. In most cases exemption from taxation leads to a smaller tax burden decrease than the tax rate. The effect depends on whether industrial production is material- or labour-intensive.

Received: January, 2014

1st Revision: March, 2014

Accepted: April, 2014

DOI:10.14254/2071-789X.2014/7-1/7

JEL Classification:  G390, H250, O310

Keywords: tax benefit, tax exemption, tax burden, R&D, innovation, Ukraine.