The Impact of R&D Tax Incentives on R&D Costs and Income Tax Burden

Christina Elschner and Christof Ernst

No 08-124, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We analyse R&D tax incentives in a detailed way considering a multi-period setting and economic assumptions which reflect a realistic economic environment. We measure the incentive's impact on the firm's total tax payments and the R&D cost by means of the simulation model European Tax Analyzer. Using different economic settings and model firms, we run sensitivity analyses and get by that a more detailed view on the effects from R&D tax incentives against the background of the framing tax system. We find that not so much the kind but rather the specific design of R&D tax incentives, the interplay with the framing tax system and the firm's profitability relative to the level of R&D expenditures heavily influence the amount of tax subsidy for R&D.

Keywords: R&D; Tax incentives; Corporate Tax Burden; EU (search for similar items in EconPapers)
JEL-codes: H25 O31 O38 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:7514

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