§ Mr. Wilkinsonasked the Chancellor of the Exchequer what tax relief is allowed against expenditure on research by private industry in the United Kingdom; and how this compares with the position in (a) the United States of America, (b) Japan, (c) West Germany and (d) France.
§ Mr. Norman LamontA recent Inland Revenue and Her Majesty's Treasury study "Fiscal Incentives for Research and Development Spending" (a copy of which has been placed in the Library) reviewed the tax treatment of R & D spending in the United Kingdom and nine other OECD countries, including the United States of America, Japan, West Germany and France. In all the countries studied most research expenditure, being on current account, is allowed for tax purposes in the year in which it is incurred. In the United Kingdom this treatment extends also to trade-related capital expenditure on scientific research. The position in each of the other countries is described in the survey referred to.
International comparisons are difficult, but, broadly speaking, while the overall effect of the corporate tax systems in the United Kingdom, Japan and West Germany is more or less neutral in relation to R & D investments, France and the United States offer very small incentives to invest. The evidence of the cost-effectiveness of such 232W incentives remains uncertain but in general it suggests that only one half the value of tax revenues forgone by Governments under such schemes is actually spent by companies on additional R & D.