Major factors affecting the implementation and effectiveness of the R&D tax incentive policy

Abstract

The Thai government began to offer an R&D tax incentive in 1996 with the objective, as declared in the policy statement, of encouraging the private sector to do more research and technology development. The tax incentive is given in the form of an exemption of corporate income tax for an amount equal to 100% of the expenses incurred in the form of fees for research and technology development paid to registered R&D service providers. Using the goal-attainment model, it was concluded that the policy has low effectiveness in stimulating R&D investment. The result of the evaluation led to the conclusion that the tax incentive did not cause the private firms to make any serious changes in their behaviors in R&D spending or investment, and the firms did not respond to the tax incentive in any predictable fashion. The factors relating to the policy formation and its direction of impact are support and willingness to act on the part of the implementing organization (-), valid theory of cause and effect (+), assumption behind policy design (-), and clarity and consistency of policy design (-). The factors relating to the policy implementation and its direction of impact are: (1) Characteristics of the implementing organization, comprising alignment of organizational goals and culture (-), clarity and consistency in communication of policy objectives (-), and availability of the monitoring mechanism (-).(2) Behaviors of implementing officers, comprising degree of understanding and commitment (-), attitudes of the Officers towards taxpayers (-), and technical ability (-), and (3) Behaviors of the target group, comprising awareness of the right to services (-), attributes of the target group: leadership (+, - ), entrepreneurship, vision (+), cash flow and profitability (-), and extent of change in behaviors (+, -). Finally, the factors in the environment that impacted the effectiveness of the policy and its direction are the tax system (-), lack of skilled labor (-), government industrial policy (-), economic conditions (-), and market competition (+). The research made a contribution to this field of public administration by identifying hypothetical linkages between the factors relating to policy formation and policy implementation and environments that impact effectiveness, which can be used for future research in the analysis of the R&D tax incentive policy and other similar policies. The research also made recommendations to modify the policy and to improve its implementation in order to enhance the effectiveness of the policy in the future.