NEWS

R&D a pretext for tax evasion

With research funding and granting of scholarships as a pretext, hundreds of large companies appear to have evaded tax, a phenomenon that has emerged accidentally and is currently being researched. Banks, insurance companies, commercial enterprises, sports associations and churches have declared expenses of over 7.6 billion euros for research that is non-existent. The previous government had made it possible since 2002 for enterprises and other bodies that had research and technology expenditure to obtain a 50 percent tax reduction from these expenses. The law did not stipulate that certificates accrediting the use of these funds on research programs had to be submitted. As a result, in the period between 2002 and 2004 over 800 enterprises abused the benevolent provisions in the law. Among those, over 100 banks and other industrial enterprises declared that they had spent over 7 billion euros on research. Over 300 insurance and commercial enterprises and even road assistance companies declared that they had spent more than 600 million euros on research. There were also cases of churches, cultural and sports associations declaring that they had spent more that 2.2 million euros on research and study grants, thus securing tax benefits. In 2004 the government passed a new law in Parliament whereby an enterprise had to submit details about research programs funded for the purpose of gaining tax benefits. The result was that all the large sponsors for research programs disappeared. In 2005 only 30 enterprises submitted documents in order to obtain confirmation that they were entitled to the generous tax benefits. The issue is now under study as the government has decided to foster real research activity in enterprises. Most probably, many companies presented a part of their operating costs as research expenditure.