To encourage productive enterprises to engage in research and development, upgrade their technological standards and increase their productivity, the Act of Encouragement of Investment (now replaced by the Act for Upgrading Industries upon expiration of its period of implementation on December 31, 1990) was amended on December 31, 1984, to add Article 34-1, Paragraph 1, of which the first sentence provides that, “where the research and development expenses paid by a productive enterprise in the year for which income tax return is filed exceeds the greatest amount spent during any of the five preceding years, an amount equal to twenty percent of the portion of the expenses over such greatest amount may be credited against the business income tax payable for that year.” Paragraph 2 of the same Article provides further that “the scope to which such tax credit for research and development expenses may be applied shall be established by the Executive Yuan.” Pursuant to this authorization, the Executive Yuan issued on September 18, 1985, the Regulations Governing the Reduction of Expenditure of the Productive Industry Outlays for Research and Development as Investment (now replaced by the Regulations Governing the Reduction of Expenditures for Corporate Research and Development, Talent Training and Establishing International Brand as Investment formulated under the Act for Upgrading Industries). Under Article 2, Paragraph 8, of the Regulations, "research and development expenses" are defined as the expenses spent by a productive enterprise for the purpose of research leading to the creation or design of any new product under a contract with a university, college, or research institution for carrying out such research work, and may be credited against the business income tax payable for that year. Although the Ministry of Finance Directive Tai-Tsai-Shui No. 7549464 issued on August 16, 1986, is, in our opinion, far from being sufficiently comprehensive in defining “research institution” to include those research institutions under the control of foundations approved by and registered with the government, meaning private corporate bodies only, expenses spent by any productive enterprise for research in developing new products, improving production management and technologies, perfecting manufacturing processes, saving energy, controlling pollution and for marketing surveys for its products are considered research and development expenses so long as the expenses are paid for any of the purposes enumerated in one of the subparagraphs of said Article and may be applied for credit against the business income tax payable for that particular year. In case of expenses paid by a productive enterprise for research work performed by an individual working part-time at its research and development unit, Paragraph 1 of the same Article may be applicable. Even if the research work is undertaken by a research institution other than one controlled by a foundation approved by and registered with the government, it is still possible for the productive enterprise to apply under Paragraph 10 of said Article for special case-by-case approval for tax reduction or exemption if the expenses spent are truly necessary. Thus, the Directive of the Ministry of Finance does not affect the interest of productive enterprises in the tax benefits available and is not in conflict with the aforementioned Regulations, nor does it contradict Article 19 of the Constitution. Nonetheless, the situation that the freedom of choice of productive enterprises to appoint institutes to do research is thus constrained and the likelihood of adverse effect that may be caused by the Directive to those institutions precluded from the application of the law of tax allowance must be reviewed from time to time so that the situation may be improved.