Title: The economic impact of Taiwan's investment tax credits and its direction of adjustment

Authors: Wen-Jung Lien, Jiann-Chyuan Wang, Su-Wan Wang, Shu-Chin Hsu

Addresses: Chung-Hua Institution for Economic Research, 75, Chang-Hsing St. Taipei, Taiwan. ' Chung-Hua Institution for Economic Research, 75, Chang-Hsing St. Taipei, Taiwan. ' Chung-Hua Institution for Economic Research, 75, Chang-Hsing St. Taipei, Taiwan. ' Chung-Hua Institution for Economic Research, 75, Chang-Hsing St. Taipei, Taiwan

Abstract: The statute for upgrading industries (SUI) applies tax incentive, subsidies and supporting measures to assist companies with industrial and technological activities and the SUI is considered to be one of Taiwan|s key industrial technology policies. In the SUI, Article 6 – investment tax credits for R&D, personnel training and automation activities – receives the highest share of tax credits and is considered to be the most important policy measure. Under such circumstances, the purposes of this paper are twofold. Firstly, this paper analyses the inducement effects of the investment tax credit using the macroeconomic model to examine its economic benefit and cost. Secondly, this paper provides suggestions for the direction adjustment of the investment tax credit policy after exploring Taiwan|s current fiscal condition, theoretical arguments as well as overall economic benefits.

Keywords: automation tax credits; economic impact analysis; industrial technology; technology policy; investment tax credits; personnel training tax credits; R&D tax credits; research and development; Statute for Upgrading Industries; subsidies; tax incentives; Taiwan; macroeconomics.

DOI: 10.1504/IJTM.2010.029415

International Journal of Technology Management, 2010 Vol.49 No.1/2/3, pp.140 - 154

Published online: 30 Nov 2009 *

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