Importance The article emphasizes that tax instruments are actively used to encourage R&D in Russia. However, the rapidly changing environment requires monitoring their composition and effectiveness on an ongoing basis. Tax credit may become a tax instrument to significantly minimize unproductive tax expenses of the State. Objectives The research examines the best practices of the developed EU economies and OECD in applying tax credits to R&D and national experience in providing tax credit. It also determines key differences and opportunities of adopting foreign experience in order to improve tax incentives for Russia's R&D. Methods The research relies upon the available regulatory, legislative and reporting data of tax authorities in Russia and abroad and uses general scientific methods and techniques. Results The EU and OECD started using tax credits actively after the 2008 crisis to stimulate R&D. Investment tax credit in Russia does not imply any reduction in tax liability, being subject to subsequent repayment and return within a certain period of time. Conclusions and Relevance We conclude that the tax credit structure should be significantly simplified or completely abolished in Russia. Whereas regional budgets and tax expenses depend on subsidies, it would be reasonable to amend the tax policy by substituting complete or partial tax reliefs for exceptional categories of taxpayers with conditional partial tax reliefs for a broader audience of taxpayers, which are actively involved in R&D. It would be practicable using tax credits.
Keywords: tax credit, tax break, R&D, investment activity, energy efficiency
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