Objectives and Options of Tax Reform: Growth Incentives from Tax Breaks for Research, Development, Innovation and Human Resources

Austria's efforts to catch up on its R&D rate were supported by an increase in indirect and direct tax breaks. Nevertheless the insufficient structural change in the Austrian economy shows that the current system of tax breaks does not produce a sufficient level of control. To foster radical innovation strategies it would be necessary to explicitly assign the objectives of indirect and direct aid. Indirect research grants are mostly aimed at technical innovation such as is characteristic for the high-tech manufacturing sector, while the economic structure is shifting towards knowledge-intensive services and the medium-high-tech industry. It must be the goal of economic policy to put all tax breaks granted for research, development and innovation on a transparent and cogent basis. It is necessary to improve the effectivity of measures and streamline their multiplicity, as well as attend to harmonising aid schemes with each other, especially between research, development, innovation and education, as an important prerequisite for upskilling human resources. Efforts to match measures to their target groups should be oriented along European best practices.