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Does Reduction In The Tax Credit Rate Retard R&D Activity? Evidence From Taiwan'S R&D Tax Credit Reform In 2010

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  • Chih‐Hai Yang
  • Chia‐Hui Huang
  • Wei‐Hsuan Chang

Abstract

This study examines the effect of the 2010 tax credit reform, which reduced the tax credit rate, on firms' R&D in Taiwan. The empirical results suggested that the tax credit rate reduction has no overall negative effects on firms' R&D expenditure. By contrast, firms were observed to increase their expenditure on R&D. R&D tax credit recipients increased their R&D expenditure more than those who did not use the R&D tax credit. Moreover, we found a considerable difference in the treatment effects of the policy reform on R&D between R&D‐intensive and less R&D‐intensive firms. (JEL H21, H25, O31, O32, O38)

Suggested Citation

  • Chih‐Hai Yang & Chia‐Hui Huang & Wei‐Hsuan Chang, 2021. "Does Reduction In The Tax Credit Rate Retard R&D Activity? Evidence From Taiwan'S R&D Tax Credit Reform In 2010," Contemporary Economic Policy, Western Economic Association International, vol. 39(2), pages 398-415, April.
    • Handle: RePEc:bla:coecpo:v:39:y:2021:i:2:p:398-415
    DOI: 10.1111/coep.12506
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    Cited by:

    1. Tuochen Li & Liang Yang, 2021. "The Effects of Tax Reduction and Fee Reduction Policies on the Digital Economy," Sustainability, MDPI, vol. 13(14), pages 1-20, July.

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    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • 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
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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