Issues in the Design of R&D Tax Incentives Policy for Chinese Firms

By combining some successful experience of the developed countries with the specific situations in China, the design of R&D tax incentives policy for Chinese firms should be moved towards four directions. First, the best portfolio of incentive instruments will be a combination of giving priority to indirect favorable preference instead of direct favorable preference. Second, the object of tax incentives should concentrate on four fields, which are R&D activities of small and medium-sized companies, cooperative R&D activities, fundamental technology researches and R&D activities of transnational companies in China. Third, as to the calculation method for tax incentives, incremental expenditure approach should be optimized. Last, a scientific assessment system with Chinese characteristics should be established as soon as possible.