Fiscal policies in support of R&D have changed dramatically in the last years. In 2008, the main fiscal incentive system for R&D was discontinued after its initial creation in 2001. The fiscal incentive system consisted of a mixed decision making process through an Inter-institutional Committee representing the CONACYT, the Ministry of Finance, the Ministry of Economy and the Ministry of Education, and supported R&D and innovation in the enterprise sector through tax credits that could not exceed 30% of expenditures and investments in R&D.
The cancellation of the Programme followed external evaluations indicating that the system benefited mainly large enterprises and multinational enterprises (MNEs), which although representing only 25% of all beneficiaries, concentrated about 80% of all fiscal incentives in 2006. Other criticisms to the system included the vague definition given to R&D projects, which resulted in the financing of marginal and incremental innovations.
The New Science and Technology Fund (FONCYT)
The New S&T Fund was created at the end of 2008 as a “transition” fund after the cancellation of the fiscal incentive system for R&D. The Programme focussed on those contributors that had paid the “Single Rate Corporate Tax” (IETU) and that had applied for the fiscal incentive system for R&D in the 2009 fiscal period. The financial support consisted of grants in cash for a maximum amount of what the contributors would have received through the expired fiscal incentive system. An inter-ministerial committee including the Ministries of Finance, of Economy and of Education, managed the concession of the financial support. The last call for applications closed in September 2010.
The OECD, in its Review of Innovation Policy 2009 called for a new fiscal scheme that is compatible with the IETU, and proposed different options for its reform. In 2009, the Innovation Support Programme was introduced as a new package of direct support programmes aiming at fostering R&D and innovation, and focusing particularly on SMEs and micro-enterprises, and thus responding to one of the main criticisms of the cancelled fiscal incentive system of having a bias against SMEs. Although it does not take the form of a fiscal incentive, the programme was set to replace the closed fiscal measure.