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Corporate Tax Incentives for R&D Investment in OECD Countries

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  • Chang Woon Nam

Abstract

Differentiating internal equity from debt finance, this study examines the generosity of R&D-specific tax incentives in OECD countries based on an NPV model. The corporate tax system generally favours debt finance and some previous findings on the possible preponderance of internal equity for financing R&D investment cannot be explained in relation to R&D-specific tax concessions. The OECD comparison demonstrates that R&D tax allowances adopted in the Czech Republic, Belgium, the UK, Denmark, Hungary, Austria and Australia generated the most substantial tax savings in 2006. Combined with such incentives, the after-tax NPV increases with the corporate tax rate, suggesting stronger investment stimulation through a tax-rate- increase -cum-base-broadening policy.

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  • Chang Woon Nam, 2012. "Corporate Tax Incentives for R&D Investment in OECD Countries," International Economic Journal, Taylor & Francis Journals, vol. 26(1), pages 69-84, September.
    • Handle: RePEc:taf:intecj:v:26:y:2012:i:1:p:69-84
    DOI: 10.1080/10168737.2010.526624
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    3. Messere, Ken & de Kam, Flip & Heady, Christopher, 2003. "Tax Policy: Theory and Practice in OECD Countries," OUP Catalogue, Oxford University Press, number 9780199241484.
    4. Mervyn A. King & Don Fullerton, 1984. "The United States," NBER Chapters, in: The Taxation of Income from Capital: A Comparative Study of the United States, the United Kingdom, Sweden, and Germany, pages 193-267, National Bureau of Economic Research, Inc.
    5. Mervyn A. King & Don Fullerton, 1984. "The Taxation of Income from Capital: A Comparative Study of the United States, the United Kingdom, Sweden, and Germany," NBER Books, National Bureau of Economic Research, Inc, number king84-1.
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