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

Ana Cinta González Cabral, Silvia Appelt and Tibor Hanappi

No 54, OECD Taxation Working Papers from OECD Publishing

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.

JEL-codes: H H2 H25 O3 (search for similar items in EconPapers)
Date: 2021-07-29
New Economics Papers: this item is included in nep-acc, nep-pbe, nep-pub and nep-tid
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:oec:ctpaaa:54-en

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