A study on R&D tax incentives: Final Report

Investment in research and innovation plays a critical role in kick-starting smart growth and upgrading the competitiveness of European companies. In the post-crisis world, Europe needs innovation more than ever before to keep up with the rapid technology advances and growing global competition. R&D tax incentives are an important innovation policy tool widely used in Europe. In some countries, during the crisis, tax instruments have become increasingly important for stimulating private R&D than direct funding. The recent study conducted jointly by DG TAXUD and DG GROW finds fiscal incentives for R&D expenses to be effective in stimulating investment in R&D. The size of the effect varies across countries which can be linked to country specific features, but, crucially, also to differences in the design and organisational practices of the fiscal schemes. The study identifies what are good designs for R&D tax incentives and which features are to be avoided. To answer this question, the study benchmarks the 80 existing R&D tax incentives in 33 countries (including all EU Member States) based on a number of identified good practices in design and administration.