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Tax incentives and R&D: an evaluation of the 2002 UK reform using micro data

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  • Irem Guceri

    (Oxford University Centre for Business Taxation)

Abstract

The United Kingdom introduced an R&D tax incentive scheme rst for SMEs in 2000 and then for large rms in 2002, gradually increasing the generosity of both schemes after 2008. This study exploits the differences between companies with similar characteristics that were just above the size threshold for eligibility to the SME scheme and those that were just below, before and after the 2002 reform. This allows for a difference-in-differences approach to measure the (additional) impact of the tax incentives on firms around this size threshold. Treatment group firms are found to have increased their R&D spending by around 18 percent on average in response to the large company tax incentive, implying a user cost elasticity of -1.35. We do not find significant differences in this effect between sectors.

Suggested Citation

  • Irem Guceri, 2015. "Tax incentives and R&D: an evaluation of the 2002 UK reform using micro data," Working Papers 1511, Oxford University Centre for Business Taxation.
    • Handle: RePEc:btx:wpaper:1511
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    Cited by:

    1. Daniel Gama e Colombo, 2016. "Impact Assessment of Tax Incentives to Foster Industrial Innovation in Brazil: The Case of Law 11,196/05," Working Papers, Department of Economics 2016_30, University of São Paulo (FEA-USP).
    2. Pöschel, Carla, 2020. "Incentive Effects of R&D Tax Incentives: A Meta-Analysis Focusing on R&D Tax Policy Designs," arqus Discussion Papers in Quantitative Tax Research 243, arqus - Arbeitskreis Quantitative Steuerlehre, revised 2020.
    3. Irem Guceri, 2016. "Will the real R&D employees please stand up? Effects of tax breaks on firm level outcomes," Working Papers 1602, Oxford University Centre for Business Taxation.

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    More about this item

    Keywords

    R&D; tax credits; difference-in-differences;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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