The purpose of this study is to present an assessment of the impact of the law on tax incentives-transformation of fiscal mechanisms on business innovation in the country. The paper examines the tax policy in relation to corporate income tax, taking into account business investments in research and development (R&D) and general expenses on innovation activities. The transformation of fiscal instruments defined in the updated tax policy is assessed by its impact not only on R&D expenses, but also on the main part of the innovative activities of industrial companies. This assessment is an important indicator for assessing tax preferences, since national legislation allows a deduction for a wide range of investments that do not fully meet the criteria for R&D investments. The effectiveness of tax incentives/preferences is measured by the elasticity of business R&D expenditures in relation to the reduction of tax costs. These results provide empirical support for tax incentives as an important part of the state strategy to stimulate development and preserve technological sovereignty.