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Tax incentives and public funding for industry innovation


Despite the progress in recent years, Brazil still has weaknesses and deficiencies related to innovation, since, even though it is a very recurrent subject in political, social and economic debates, when compared to other countries, there is an unsatisfactory proportion between national investments in innovation and the country’s Gross Domestic Product (GDP).

A survey carried out by the National Confederation of Industry (CNI), with 196 medium and large industrial and service companies selected, for example, points out that throughout 2020, only 10% of them used public funding lines aimed at research and development (R&D). ). The study also reveals that 89% of the companies consulted financed their innovation activities with their own resources, without having any tax incentive law or public financing line.

The adoption of public incentive laws aimed at innovation plays a key role in the development and economic growth of any country.

In addition, over the years, it has been noticed the non-application of an effective policy aimed at public funding and increasing the Brazilian innovation ecosystem. This results in the limitation of the number of public financing lines aimed at companies that invest in innovation, as well as a greater bureaucracy in obtaining these resources. All these aspects, added to an instability in the global economic scenario, lead to greater insecurity of companies in the use of public funding and tax incentive laws, leading, therefore, the companies’ innovation activities to be funded mostly with their own resources.

The survey reinforces the fact that many companies do not clearly see the benefits of carrying out R&D in technological innovation with resources from public funding and tax incentive laws, especially due to the lack of disclosure by official bodies and even in relation to to economic subsidies and their applicability to Brazilian companies.

The adoption of public incentive laws aimed at innovation plays a key role in the development and economic growth of any country, being especially noticeable in the case of developing countries, such as Brazil. Each public incentive positively impacts the innovation ecosystem, benefiting companies of different sizes and operating sectors, thus having a certain scope and economic impact in the country.

However, regardless of the sphere in which these public incentive laws fall – federal, state or regional –, they allow the country to leverage and grow through greater professional training, insertion and development of new technologies and technical knowledge for the industry. Brazilian market, as well as products with greater embedded technology, following the global technological advance.

Thus, everything results in greater competitiveness of national companies against foreign competitors, as well as less dependence on imported technologies, reducing production costs, which in turn allows investments in other innovative processes, forming an extremely beneficial continuous cycle. not only at the business level, but also at the macroeconomic level of the country.

It is also worth remembering that, despite the progress made by Brazil in the global innovation scenario, reaching 58th place in the Global Innovation Index in 2020, there are many facets of the innovation ecosystem that can be implemented through tax incentives, ensuring even more investments in research, development and technological innovation (RD&IT) by companies.

With regard specifically to tax incentives aimed at innovation at the federal level, some updates have been carried out or are in progress, such as the Bill (PL) No. 4944, which proposes improvements to the Lei do Bem (Law No. ), including some changes in the way of accounting for the incentive, allowing a better use of it for cases in which a company ends the year with a tax loss, which is currently not possible.

In addition, another recent legal update is the discussion about improvements in the Information Technology Law (Law nº 8.248/91), aiming at the creation of a differentiated financial credit value for companies that industrialize microcomputers of up to R$ 11 thousand, thus increasing encouraging the development of this equipment and its respective technologies on national soil, reducing the interdependence of foreign resources.

Furthermore, at the end of 2021, after a period of uncertainty regarding the benefit of the ex-tariff regime for items classified as Capital Goods (BK) and IT and telecommunication goods (BIT), which grants a reduction in the tax rate of imports for items with no similar national, rules were published that extended the validity of this incentive until the year 2025, ensuring security for companies to enjoy these benefits, which indirectly impact the values ​​of IPI and ICMS related to these imports, for example .

A final legislative update that is worth mentioning, despite not being directly linked to tax incentives, but which may impact them, is the tax reform, which is in the stage of public hearings with specialists in the economic sector and focuses on reducing the Brazilian tax burden, which could have a positive impact on the national innovation ecosystem, if approved.

Considering, therefore, the constant updates in the tax incentive laws, and the current economic scenario in the country, in which there is political instability, the temporary increase in interest rates and, as a consequence of economic policies, the increase in inflation in the country and With the devaluation of the real, it becomes even more important for companies to invest in innovation, as a way of encouraging the development of Brazilian industry, keeping them competitive in the current context, in addition to moving the entire ecosystem linked to these innovations.

In addition, Brazil and the world are currently facing an economic recovery process resulting from the Covid-19 pandemic, which in the last two years has imposed profound changes on society, including companies, which have had to adapt to the new reality imposed. As a result, the need for investments in innovation became latent, mainly linked to the automation of processes and digital transformation, so that in many cases companies continued their operations and strengthened their market share.

Despite all the difficulties and challenges that Brazilian companies currently face, the future prospects for the innovation landscape are positive, as more and more companies are becoming aware of the importance of innovating, with the support of tax incentive laws and public funding.

In order for there to be a successful and effective application of the incentives provided for in the legislation, there must be constant updates and adaptations of the incentive laws in Brazil, in all governmental spheres, as well as investment in public policies of public financing and economic subsidies that forge the technological development and guarantee a secure base for investments by companies, in order to contribute to the economic evolution of the country.

André Weber holds a degree in Industrial Engineering, a specialist in Business Management and Innovation and a product supervisor at the FI Group.

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