Assessment of the effectiveness of anti-COVID tax support for innovation activities of small and medium-sized enterprises in OECD countries

Alina O. Shapovalova, Yuriy B. Ivanov, Victoriia F. Tyschenko, Vlada V. Karpova

Abstract


The global economy has rebounded from the lows of 2020, but its recovery will depend on innovations. Therefore, it is important to identify the most effective tax support instruments for the innovation activities of small and medium-sized enterprises (SMEs) that are used in the framework of anti-crisis economic policies in the OECD countries. It is suggested that tax incentives are the most effective tax instrument of all; the effectiveness of the profit tax benefit depends on the SME’s profitability; as to the social insurance and pension contribution, there is an allowable minimum of the rate, determined by the level of wages, that will stimulate innovation. To assess the effectiveness of tax support tools, the study used the methods of linear multivariate regression and simulation in Simulink. The source of information for regression analysis was the data published by the World Bank and the Organization for Economic Cooperation and Development (OECD). It was concluded that the most effective measures of tax support are tax incentives, as well as deferred payment of social insurance and pension contributions. The 10% profit tax was shown to be optimal to stimulate innovation provided the company keeps the saved profit for development. For innovative SMEs, the minimum allowable contribution rate for social insurance and pension provision, which stimulates their innovative activities, is 12%. The results of modeling confirmed that the proposed threshold indicators for supporting SMEs’ innovation activity can be an effective tool for overcoming the consequences of the global crisis caused by the COVID-19 pandemic.

For citation

Shapovalova A.O., Ivanov Yu.B., Tyschenko V.F., Karpova V.V. Assessment of the effectiveness of anti-COVID tax support for innovation activities of small and medium-sized enterprises in OECD countries. Journal of Tax Reform. 2021;7(1):68–86. DOI: 10.15826/jtr.2021.7.1.091

Article info

Received January 20, 2021; Revised March 21, 2021; Accepted April 7, 2021


Keywords


tax incentives, tax support, income tax, social security and pension contributions, innovative activity, small and medium-sized enterprises, COVID-19

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Copyright (c) 2021 Alina O. Shapovalova, Yuriy B. Ivanov, Victoriia F. Tyschenko, Vlada V. Karpova

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