Assessing the volume and effectiveness of tax support for science and innovation in the Russian Federation: The value added tax case

Subject. The article addresses instruments of tax incentives for science and innovation development. Objectives. The aim is to elaborate recommendations for improving the mechanism of taxation of value added created in the innovation sphere. Methods. We applied general scientific methods of research. Results. The paper identified impracticality of using value-added tax exemptions to reduce the tax burden on economic entities engaged in the innovation sector. The specific features of applying the offset mechanism in calculating value-added tax as an indirect tax lead to a lack of stimulating effect, if the exemption is granted at certain stages of the production cycle. In this case, the taxpayer allocates the "input" value-added tax to the cost of the produced goods, increasing production costs and the selling price of the goods. Conclusions. It appears more acceptable to reduce the tax rate on value-added tax for entities engaged in innovative activities. The greatest effect of introducing a preferential value-added tax rate can be achieved when it is utilized by all participants in the cycle of production and sale of innovative products. It should be ensured that all other elements of the tax remain unchanged.