Tax Deductions For Research And Development: Implications For Technology Firms Like Lepu Medical
Olivia Mae Harrison
Department of Business Administration, University of Technology, Springfield, USA
Abstract
Innovation serves as a fundamental pillar for enterprise resilience, adaptability, and competitive advantage in the context of dynamic and complex macroeconomic environments. However, despite its strategic importance, innovation is often hindered by significant uncertainties, high sunk costs, and the lack of a robust innovation protection framework. These barriers discourage enterprises from fully engaging in research and development (R&D) activities, while enabling imitation and the misappropriation of economic gains by non-innovating entities.
In response to these challenges, governments have implemented a range of policy instruments, among which R&D expense deductions stand out as a crucial fiscal tool to stimulate innovation. Introduced in 2008, the R&D expense deduction policy has evolved through multiple reforms aimed at expanding its reach and increasing its impact. The 2018 policy revision broadened the eligibility criteria, allowing most enterprises to claim deductions of up to 75% of qualifying R&D expenditures. In 2021, further enhancements were introduced specifically for manufacturing firms, raising the deduction rate to 100%.
This study examines the role and effectiveness of R&D expense deduction policies in promoting innovation and supporting high-quality economic development. By analyzing the policy’s evolution and its practical implications for enterprises, this paper highlights the significance of targeted government intervention in fostering a more innovative and competitive business environment. The findings contribute to a deeper understanding of fiscal innovation incentives and provide insights for future policy refinement