Profit Taxation, R&amp;amp;D Spending, and Innovation

We discuss corporate tax effects on multinationals’ R&D. Theoretically, we find that a host country’s tax increase may boost local R&D expenditure: while R&D becomes deductible at a higher rate, this higher rate may not apply to all R&D returns. First, as R&D creates a public good within the MNE, some R&D returns are taxed at other countries’ tax rates. Second, some of the R&D returns are taxed at a lower IP regime tax rate. The positive tax rate effect is empirically supported by country-by-country R&D data of U.S.-owned subsidiaries for countries that have an IP regime.

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Attracting profit shifting or fostering innovation? On patent boxes and R&D subsidies

Haufler

Schindler

2023

European Economic Review

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Profit Taxation, R&D Spending, and Innovation

Cited by 5 publications

References 74 publications

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Inter-municipal cooperation and public employment: evidence from French municipalities

Corporate income tax, IP boxes and the location of R&D

Attracting profit shifting or fostering innovation? On patent boxes and R&D subsidies

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