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Towards a European R&D incentive? An assessment of R&D provisions under a common corporate tax base

Author

Listed:
  • Diego d’Andria
  • Dimitrios Pontikakis
  • Agnieszka Skonieczna

Abstract

A recent proposal for a Common Consolidated Corporate Tax Base (CCCTB) across the European Union (EU) includes provisions in support of business R&D investment. This paper presents the rationale for the inclusion of R&D provisions, quantifies the subsidy implied by alternative options using the user's cost approach and approximates aggregate impacts by means of simple extrapolations from elasticities found in literature. We find that the provisions for immediate expensing of R&D included in the 2011 proposal would be less generous than what national schemes currently offer. We present alternative allowances that would serve to either maintain present levels or increase business R&D expenditure and we cost them in terms of foregone CIT revenue. In view of the pressing current need for a boost in business investment and the EU's R&D investment targets for the year 2020, we argue that the level of support should be ambitious. Importantly, to take full advantage of the opportunities afforded by this tax reform, EU member states will have to engage in complementary interventions in their national innovation systems. We conclude with a broad consideration of what these may be for the varied and variably developed business innovation capabilities found across the EU.

Suggested Citation

  • Diego d’Andria & Dimitrios Pontikakis & Agnieszka Skonieczna, 2018. "Towards a European R&D incentive? An assessment of R&D provisions under a common corporate tax base," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 27(5-6), pages 531-550, August.
    • Handle: RePEc:taf:ecinnt:v:27:y:2018:i:5-6:p:531-550
    DOI: 10.1080/10438599.2017.1376168
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    Cited by:

    1. Uyar, Ali & Bani-Mustafa, Ahmed & Nimer, Khalil & Schneider, Friedrich & Hasnaoui, Amir, 2021. "Does innovation capacity reduce tax evasion? Moderating effect of intellectual property rights," Technological Forecasting and Social Change, Elsevier, vol. 173(C).
    2. Bronwyn H. Hall, 2020. "Tax Policy for Innovation," NBER Chapters, in: Innovation and Public Policy, pages 151-188, National Bureau of Economic Research, Inc.
    3. Bertoni, Fabio & Martí, Jose & Reverte, Carmelo, 2019. "The impact of government-supported participative loans on the growth of entrepreneurial ventures," Research Policy, Elsevier, vol. 48(1), pages 371-384.

    More about this item

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • 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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