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Corporate effective tax rates for R&D: The case of expenditure-based R&D tax incentives

Author

Listed:
  • Ana Cinta González Cabral
  • Silvia Appelt
  • Tibor Hanappi

Abstract

R&D tax incentives have become a widely used policy tool to promote business R&D. How do they shape firms’ incentives to invest in R&D? This paper contributes a methodology to construct forward-looking effective tax rates for an R&D investment that reflect the value of expenditure-based R&D tax incentives. The new OECD estimates cover 48 countries and consider the case of large profitable firms, accounting for the bulk of R&D in most economies. The results provide new insights into the generosity of R&D tax incentives from the perspective of firms that decide on whether or where to invest in R&D (extensive margin) and the level (intensive margin) of R&D investment. The generosity of the favourable tax treatment of R&D is shown to vary at the intensive and extensive margins, highlighting differences in countries’ strategies to support R&D through the tax system.

Suggested Citation

  • Ana Cinta González Cabral & Silvia Appelt & Tibor Hanappi, 2021. "Corporate effective tax rates for R&D: The case of expenditure-based R&D tax incentives," OECD Taxation Working Papers 54, OECD Publishing.
    • Handle: RePEc:oec:ctpaaa:54-en
    DOI: 10.1787/ff9a104f-en
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    Cited by:

    1. Katarzyna Szopik-Depczyńska & Izabela Dembińska & Agnieszka Barczak & Angelika Kędzierska-Szczepaniak & Krzysztof Szczepaniak & Radosław Depczyński & Giuseppe Ioppolo, 2021. "Does Crowdsourcing as Part of User-Driven Innovation Activity Affect Its Results? An Empirical Analysis of R&D Departments in Poland," Energies, MDPI, vol. 14(18), pages 1-20, September.

    More about this item

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • H - Public Economics

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