Taxes and Innovation

Tasks

This sub-project examines the role of tax policy for innovation and thus long-term growth.

Methods

In a first step, various instruments for tax and project-oriented R&D support are discussed and the general connection between tax policy (income and corporate taxes) and innovation incentives is examined. In a second step, we systematically evaluate existing studies in a meta-analysis to determine whether their study design allows for a causal interpretation and how large the economic effect on innovation and growth is. In our evidence report, instruments and taxes that are used in Germany as well as instruments in other countries are evaluated. In a third step, (micro) data will be collected and processed for a separate empirical contribution. The aim is to prepare a study design which allows a causal interpretation and concrete political conclusions for the ifo Reform Program.

Results

The evidence report with meta-analysis draws a predominantly positive picture of the effectiveness of R&D tax incentives. The literature indicates in particular that both tar-geted (input-based) tax incentives and general corporate tax incentives have a positive effect on private-sector R&D activities.