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The impact of fiscal relief on multinationals business R&D investments: a cross-country analysis

The impact of fiscal relief on multinationals business R&D investments: a cross-country analysis Abstract In this article, we aim at a better understanding and measurement of the importance of R&D tax incentive as a driver of R&D investments of MNEs. Using data both at sectoral and country level, we develop two counterfactual exercises to provide evidence on the effects of R&D tax relief on MNEs’ inward R&D business investments (Inward BERD): a matching and a continuous-treatment econometric model. In this counterfactual perspective, we compare Countries with a tax incentive scheme for R&D and countries that do not have this kind of policy in action during the period 2000–2013. Results show that the effect of the R&D tax incentives on Inward BERD is positive, with an initial flat region and a steeper one starting at a dose around 40%, which corresponds to a tax incentive ratio on Total BERD of 6.8% (tax rate relief). The positive and statistically significant pattern starts however from a dose around 65% onwards, which corresponds to an 11.1% of tax relief. This result shows a relatively low sensitivity of Inward BERD to the R&D fiscal regime, except for the case of a high and thus costly incentive intensity. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png "Economia Politica" Springer Journals

The impact of fiscal relief on multinationals business R&D investments: a cross-country analysis

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References (52)

Publisher
Springer Journals
Copyright
2018 Springer International Publishing AG, part of Springer Nature
ISSN
1120-2890
eISSN
1973-820X
DOI
10.1007/s40888-018-0123-5
Publisher site
See Article on Publisher Site

Abstract

Abstract In this article, we aim at a better understanding and measurement of the importance of R&D tax incentive as a driver of R&D investments of MNEs. Using data both at sectoral and country level, we develop two counterfactual exercises to provide evidence on the effects of R&D tax relief on MNEs’ inward R&D business investments (Inward BERD): a matching and a continuous-treatment econometric model. In this counterfactual perspective, we compare Countries with a tax incentive scheme for R&D and countries that do not have this kind of policy in action during the period 2000–2013. Results show that the effect of the R&D tax incentives on Inward BERD is positive, with an initial flat region and a steeper one starting at a dose around 40%, which corresponds to a tax incentive ratio on Total BERD of 6.8% (tax rate relief). The positive and statistically significant pattern starts however from a dose around 65% onwards, which corresponds to an 11.1% of tax relief. This result shows a relatively low sensitivity of Inward BERD to the R&D fiscal regime, except for the case of a high and thus costly incentive intensity.

Journal

"Economia Politica"Springer Journals

Published: Aug 1, 2018

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