THE IMPACT OF TAX INCENTIVES FOR RESEARCH AND DEVELOPMENT ON ECONOMIC GROWTH - EXAMPLE OF EASTERN CROATIA

Process research and development and technological progress are partly endogenous process that is influenced by the political and business environment. Since it is necessary to the existence of incentives that are mostly focused on direct measures (stimulus funding) and indirect measures (tax incentives and protection of intellectual property rights). Most states through their tax systems approved tax incentives for research and development and they make up a significant part of the tax benefits that are granted under the income tax. The most common forms of tax incentives for research and development of the tax base of income tax for eligible costs of the project of scientific research and development, delayed payment of taxes, and the tax credit. Apart from the tax incentives, some governments grant subsidies for research and development activities. The Republic of Croatia, regardless of which approves tax incentives and state aid for research and development, has a significantly smaller the share of expenditure for research and development in GDP in comparison with other EU member states. Accordingly, the authors will explore, define and analyze the structure of tax incentives and state aid for research and development in Croatia, as well as the importance and impact of these incentives and support the economic performance Eastern Croatia. The aim of this paper is to point out the importance of encouraging research and development through tax incentives and state aid, with the aim of achieving greater economic growth both in the Republic of Croatia, as well as in Eastern Croatia. Authors will investigate and provide an overview of the most important studies in the area of influence of R&D activities on economic growth. The paper will be presented and the basic forms of tax incentives and state aid to be granted in various ways in the Republic of Croatia, and the level of their use in Eastern Croatia. Also, based on the analysis the authors will provide proposals for improvements in the area of incentives for research and development.