Riding the Wave of the Global Minimum Tax Regime: The Rise and (Potential) Transformation of Super Deductions for Research and Development (R&D) Expenses in Asia

This article examines the transformation of innovation ecosystems in five Asian economies – China, Hong Kong, India, Indonesia, and Singapore – highlighting the role of super deduction (SD) regimes in stimulating research and development (R&D) investment, strengthening domestic technological capabilities, and attracting foreign capital. These mechanisms have been central to economic development and to positioning these jurisdictions as key innovation hubs. The study adopts the perspective of developing, capital-importing Asian economies, contrasting with the dominant literature focused on developed countries. From this viewpoint, tax incentives are seen primarily as developmental tools rather than sources of tax base erosion. However, the introduction of the Organization for Economic Co-operation and Development (OECD)/G20 Pillar Two (Global Anti-Base Erosion (GloBE)) rules challenges the effectiveness of these incentives, as they may be neutralized through top-up taxes. The paper analyses the tension between SD regimes and the global minimum tax, assessing compliance costs and institutional burdens. It concludes that these economies must redesign their tax incentives to align with Pillar Two, ensuring continued competitiveness and sustained technological progress.