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A new evaluation of public support to R&D in Belgium shows that regional subsidies and the federal partial exemption from payment of the withholding tax for researchers may have helped to increase R&D expenditure in Belgium. The results are less positive for some benefits granted by the federal government through corporate income taxation. As these tax benefits account for the lion's share of the rapidly increasing budgetary costs of public support for R&D, the efficiency of public support could be increased.
Whereas regional subsidies and some tax incentives appear to encourage firms to increase their investment in R&D activities, some incentives provided through corporate income taxation seem to have no additionality effect or even result in the crowding out of firms’ own R&D expenditures. As these incentives claim the lion’s share of the rapidly rising budgetary cost of public support to business R&D, the efficiency of tax incentives for R&D activities could be increased by introducing a cap on the total amount of public support that companies can receive, as also suggested by an international study.
Federal Planning Bureau
