This chapter presents an approach for measuring government funding of R&D using data from government budgets. This type of funder-based approach for reporting R&D involves identifying all the budget items that may support R&D activities and measuring or estimating their R&D content. Advantages of this approach include the ability both to report significantly more timely government R&D funding totals since they are based on budgets and to link these totals to policy considerations through classification by socioeconomic objectives.The definitions discussed in this chapter are, as far as possible, compatible with the international methodologies and guidelines contained in the IMF’s Government Finance Statistics Manual (GFS) of 2014 and the 2008 System of National Accounts, as well as the methodologies developed by Eurostat such as the Nomenclature for the Analysis and Comparison of Scientific Programmes and Budgets (NABS).

Governments in several countries provide tax support for R&D with the aim of promoting R&D investment in the economy by granting preferential tax treatment of eligible R&D expenditures, especially to business enterprises. Tax expenditures are complex objects of measurement, and not all statistical systems separately capture all types of tax relief measures. Reporting such tax support in supplementary reports would facilitate transparency and more balanced international comparisons. In response to user and practitioner interest in addressing this gap in previous editions of this manual, this chapter provides guidelines on reporting government support for R&D through tax incentives, with a view to assisting in the production of internationally comparable indicators of Government Tax Relief for R&D expenditures. These guidelines are based on the experience accumulated from a series of exploratory data collections carried out by OECD. Because of the novelty of the guidelines introduced in this chapter, further measurement improvements may be introduced after the publication of this manual.