Economics at your fingertips  

Corporate taxation and the quality of research and development

Christof Ernst, Katharina Richter-Weiss and Nadine Riedel ()

International Tax and Public Finance, 2014, vol. 21, issue 4, 694-719

Abstract: This paper examines the impact of tax incentives on corporate research and development (R&D) activity. R&D tax incentives are commonly provided as special tax allowances or tax credits. In recent years, several countries also reduced their income tax rates on R&D output with the purpose to foster R&D activity. Previous papers have shown that all three tax instruments are effective in raising the quantity of R&D related activity. We in turn assess the impact of corporate tax incentives on the quality of R&D projects, i.e., their innovativeness and earnings potential. Using rich data on corporate patent applications to the European patent office, we find that a low tax rate on patent income raises the average profitability and innovation level of the projects undertaken in a country. The effect is statistically significant and economically relevant and prevails in a number of sensitivity checks. Generous R&D tax credits and tax allowances are in contrast found to exert a negative impact on project quality. Copyright Springer Science+Business Media New York 2014

Keywords: Corporate taxation; Research and development; Micro data; H3; H7; J5 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

Downloads: (external link) (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Corporate Taxation and the Quality of Research and Development (2013) Downloads
Working Paper: Corporate taxation and the quality of research and development (2013) Downloads
Working Paper: Corporate taxation and the quality of research and development (2013) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/10797/PS2

DOI: 10.1007/s10797-014-9315-2

Access Statistics for this article

International Tax and Public Finance is currently edited by Ronald B. Davies and Kimberly Scharf

More articles in International Tax and Public Finance from Springer, International Institute of Public Finance Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

Page updated 2024-06-08
Handle: RePEc:kap:itaxpf:v:21:y:2014:i:4:p:694-719