PROBLEMS OF TAX INCENTIVE ON RESEARCH AND TECHNOLOGY DEVELOPMENT: COMPARISON WITH MALAYSIA AND SINGAPORE

Abstract

We cannot refuse that the growth of this current world is based on technology and innovation. Governments in many countries use different measures for stimulating Research and Development (R&D) activities among private entities.  One of the most effective measures used is granting tax incentives. Since other countries are searching for the way to add value to its product and service by improving technology and innovation, Thailand cannot avoid going through the same path with those countries. In Thailand, there are some measures that have been enforced to promote R&D, such as the exemption of income equal to the amount spent for R&D activities under Royal Decree issued under the Revenue Code regarding reduction and exemption from revenue taxes (No. 297) B.E. 2539 (The Royal Decree No.297).  Under this measure, companies can spend money on hiring a registered R&D service provider to conduct R&D on their behalf in order to qualify for the exemption.  In practice, if a company or R&D Unit would like to become a R&D service provider, they have to file an application to Ministry of Finance (MOF) through the Revenue Department. If a company hires the approved R&D service provider, they will be entitled to the exemption, while those registered R&D service provider will only gain more business.

Since the R&D tax incentive program was implemented in Thailand in 1996, there are questions concerning proper implementation of this measure, and whether or not the Thai R&D tax incentive scheme really stimulates R&D investment in the country. Questions also arise whether the 200 per cent of tax allowance was enough to effectively encourage private sectors to invest in R&D. Even though Thailand has recently enacted the Royal Decree issued under the Revenue Code regarding reduction and exemption from revenue taxes (No. 598) B.E. 2559 (The Royal Decree No.598) for the expenditures paid on research and development of technology and innovation in February 2016, considerations must still be taken on the appropriateness of this Royal Decree towards the promotion of R&D, and whether such new tax scheme would encourage private entities to invest in R&D. It is also important to consider whether such investment would be sufficient to solve the current R&D issues in Thailand.

This thesis aims to expand on the understanding of Thailand’s current R&D tax policy, compared to other counties, as well as providing recommendations on how to promote R&D activities or R&D investments in the private sector more effectively.Tax Incentive