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Portugal leads Europe in R&D tax credit ranking

Portugal’s system for small business R&D tax credits is Europe’s most generous, according to a report by the US Information Technology & Innovation Foundation.

Portugal also comes second after India in a world-wide ranking of national R&D tax credit rates, far ahead of Europe’s biggest innovator Germany, which is in last place (42nd) and the UK which is in 25th place.

The survey was published in July, and measures the national tax subsidy ratio for small and medium-sized business.

Other European countries in the top ten for small business R&D tax credits include Denmark, France, Hungary and Spain.

The report also ranks countries in order of tax credit support for large companies. Second-placed France tops European countries in this ranking with India in first place, followed by Portugal in third place. Spain, Denmark, Netherlands and the UK are all in the top-ten.

ITIF is a non-profit think tank based in Washington, DC, which advises government. The report, which was written for a US audience, calls on the United States to boost R&D tax credit availability to support innovation. The United States is 27th in the small business ranking, topped by Russia, Taiwan, South Africa and Turkey.

“Without R&D tax incentives, companies will not conduct enough R&D,” the authors claim in the report. They add that increasing research tax credits for small businesses will ultimately boost innovation and strengthen economies.

The report, however, does not explain why many countries that come at the bottom of both tax credit rankings—for example Germany, Sweden and Israel—are among the world’s best innovators and have some of the most resilient economies.