Corporate effective tax rates for R&D
The case of expenditure-based R&D tax incentives
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.
Published on July 29, 2021
In series:OECD Taxation Working Papersview more titles