Measuring Tax Support for R&D and Innovation

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Highlights | Indicators | Measurement

In addition to direct support measures such as grants, governments worldwide increasingly rely on tax incentives to promote business R&D and encourage innovation and economic growth. Since 2007, the OECD has been developing measurement and analysis methodologies to provide qualitative and statistical evidence on the use, cost and impacts of R&D tax incentives.

Latest news, April 2021: Release of the 2020 edition of the OECD R&D tax incentive country profiles. These extended profiles provide the most up-to-date internationally comparable information – qualitative and quantitative – on the design and cost of R&D tax relief provisions used by countries to incentivise business R&D. Drawing on the latest indicators of government tax relief for R&D from the OECD R&D Tax Incentives database, updated in March 2021, they highlight recent and long-term trends in the role of R&D tax incentives in the innovation policy mix across OECD countries and partner economies.

Direct government funding and tax support for business R&D, 2018
As a percentage of GDP

Direct government funding and tax support for business R&D

Source: OECD R&D Tax Incentives Database, March 2021 | Data and notes

Latest publication, July 2021: The OECD Taxation Working Paper “Corporate Effective Tax Rates for R&D: The case of expenditure-based R&D tax incentives” provides a toolbox for policymakers to assess the impact of R&D tax incentives on firms’ R&D investment decisions at the extensive margin (where to locate R&D investment) and at the intensive margin (how much to invest), measured by the cost of capital and effective average tax rate for R&D respectively. These two new R&D Tax Incentive indicators, developed by the OECD Centre for Tax Policy and Administration and OECD Directorate for Science, Technology and Innovation and in their first edition available for the years 2019 and 2020, were released as part of the OECD Corporate Tax Statistics database and OECD R&D Tax Incentives database in July 2021.

COUNTRY PROFILES - 2020 edition (released March 2021)

Click here for general and country-specific notes on the B-index time-series estimates contained in the 2020 edition of OECD R&D tax incentive country profiles.

information on the Design and scope of R&D tax incentives

microBeRD: an OECD study on the impact of R&D tax incentives

The OECD is working on a micro-data project which applies a “distributed” approach to the empirical analysis of micro-data. The OECD microBeRD project project investigates and models the incidence and impact of public support for business R&D in collaboration with national experts with access to confidential R&D and public support micro-data. This approach facilitates a co-ordinated statistical analysis of the impact of tax relief design features and their interaction with direct forms of public R&D funding by exploiting variation in support within and across countries.

The final report with the results from the first phase of the microBeRD project (2016-19) was launched at a joint event with the European Commission in October 2020, organised as part of the 2020 EC-OECD Innovation and growth webinar series. For more details and to watch this event, see here.

OECD publications, working papers and policy papers on R&D tax incentives