Tax support evaluation for R&D activities of companies
Abstract
The article evaluates the impact of tax support for R&D on the volume of R&D outputs generated by companies. The number of patent applications was chosen as the R&D metric for business output. Both linear dependence using linear regression and non-linear dependence using decision trees were used within the research. The significance of indirect support in the context of other sources of funding R&D activities of companies was primarily assessed. The dependence of the number of patent applications on individual sources of financing of the Business Enterprise Expenditure on R&D was examined. Even after scaling variables, the research in the period under review confirmed the strongest dependence between the number of patent applications and the financial resources provided by the Business enterprise sector for all countries surveyed. Subsequently, the model reduced by the impact of Business enterprise sector resources was created. Of the three remaining variables considered, the analysis showed the strongest dependence of the number of patent applications on the amount of indirect support. The research points to the fact that impact of tax support on the volume of relevant R&D outputs is relatively significant.
Keyword : tax incentives, corporate income tax, support for R&D, indirect support, patent applications, linear regression
How to Cite
Cernikova, M., & Hyblerova, S. (2021). Tax support evaluation for R&D activities of companies. Technological and Economic Development of Economy, 27(5), 1057-1071. https://doi.org/10.3846/tede.2021.15147
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Czarnitzki, D., & Hussinger, K. (2018). Input and output additionality of R&D subsidies. Applied Economics, 50(12), 1324–1341. https://doi.org/10.1080/00036846.2017.1361010
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Griliches, Z. (2000). R&D, education, and productivity: a retrospective. Harvard University Press.
Guellec, D., & van Pottelsberghe de la Potterie, B. (2003). The impact of public R&D expenditure on business R&D*. Economics of Innovation and New Technology, 12(3), 225–243. https://doi.org/10.1080/10438590290004555
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Klemens, B. (2016). A Boxing Match: Can intellectual property boxes achieve their stated goals? U.S. Department of the Treasury, Office of Tax Analysis. https://doi.org/10.2139/ssrn.2822575
Köhler, C., Laredo, P., & Ramme, R. (2012). The impact and effectiveness of fiscal incentives for R&D. (Nesta Working Paper No. 12/01). https://doi.org/10.22163/fteval.2012.91
Lokshin, B., & Mohnen, P. (2013). Do R&D tax incentives lead to higher wages for R&D workers? Evidence from The Netherlands. Research Policy, 42(3), 823–830. https://doi.org/10.1016/j.respol.2012.12.004
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Ministry of Regional Development of the Czech Republic. (2018, December 10). Metodické doporučení pro oblast veřejné podpory. https://www.dotaceeu.cz/getmedia/a3fdbcee-45a7-440e-a891-dc21381b2b04/MD-verejna-podpora_v2.pdf.aspx?ext=.pdf
Nauwelaers, C. (2016). Public research and innovation policies and investment and their evolution since the crisis. In Science, research and innovation performance of the EU: A contribution to the open innovation, open science, open to the world agenda. European Commisison.
Nelson, R. (1959). The simple economics of basic scientific research. Journal of Political Economy, 67(3), 297–306. https://doi.org/10.1086/258177
Neubig, T., Galindo-Rueda, F., & Appelt, S. (2016). Fiscal incentives for R&D and innovation in a diverse world (OECD Taxation Working Papers No. 27). OECD Publishing.
Nilsen, Ø. A., Raknerud, A., & Iancu, D.-C. (2020). Public R&D support and firm performance: A multivariate dose-response analysis. Research Policy, 49(7), 104067. https://doi.org/10.1016/j.respol.2020.104067
Ognyanova, D. (2017, September). R&D tax incentives: How to make them most effective? (Working Paper). European Commission.
Pfeiffer, O., & Spengel, C. (2017). Tax incentives for research and development and their use in tax planning (ZEW Discussion Paper No. 17-046). ZEW. https://doi.org/10.2139/ssrn.3067926
Pisár, P., Ďurčeková, I., & Stachová, M. (2020). The contribution of innovation actors into business R&D funding – does the substitution effect of public support work in the EU? E&M Economics and Management, 23(1), 121–134. https://doi.org/10.15240/tul/001/2020-1-009
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Schumpeter, J. A. (1954). History of economic analysis. Oxford University Press.
Skeie, Ø. B., Johansson, Å., Menon, C., & Sorbe, S. (2017). Innovation, patent location and tax planning by multinationals (OECD Economics Department Working Papers No. 1360). OECD Publishing.
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The Organisation for Economic Co-operation and Development. (2013). Definition, interpretation and calculation of the B index. OECD Publishing. https://www.oecd.org/sti/b-index.pdf
The Organisation for Economic Co-operation and Development. (2015). Frascati manual 2015: guidelines for collecting and reporting data on research and experimental development (Series: The Measurement of Scientific, Technological and Innovation Activities). OECD Publishing.
Toledano, P., Johnson, L., Sachs, L. E., & Tavares, T. (2016). Rethinking investment incentives: trends and policy options. Columbia University Press. https://doi.org/10.7312/columbia/9780231172981.003.0012
Warda, J. (2001). Measuring the value of R&D tax treatment in OECD countries. In OECD STI review No. 27. Special issue on new science and technology indicators (pp. 185–211). OECD Publishing.
Westmore, B. (2013). R&D, patenting and growth: the role of public policy (OECD Economics Department Working Papers No. 1047). OECD Publishing.
Basto, R. B., Martins, A., & Nogueira, G. (2021). The impact of R&D tax incentives in Portugal (GEE Papers No. 0158). Gabinete de Estratégia e Estudos, Ministério da Economia.
Bernanke, C. B. S. (2011, May 16). Promoting research and development: the government’s role [Conference presentation]. Board of Governors of the Federal Reserve System at the Conference on New Building Blocks for Jobs and Economic Growth, Washington.
Bloom, N., Schankerman, M., & van Reenen, J. (2013). Identifying technology spillovers and product market Rivalry. Econometrica, 81(4), 1347–1393. https://doi.org/10.3982/ECTA9466
Bronzini, R., & Iachini, E. (2014). Are incentives for R&D effective? Evidence from a regression discontinuity approach. American Economic Journal: Economic Policy, 6(4), 100–134. https://doi.org/10.1257/pol.6.4.100
Calvino, F., Criscuolo, C., & Menon, C. (2016). No country for young firms?: Start-up dynamics and national policies (OECD Science, Technology and Industry Policy Papers No. 29). OECD Publishing.
Carboni, O. A. (2011). R&D subsidies and private R&D expenditures: evidence from Italian manufacturing data. International Review of Applied Economics, 25(4), 419–439. https://doi.org/10.1080/02692171.2010.529427
Castellacci, F., & Lie, C. M. (2015). Do the effects of R&D tax credits vary across industries? A metaregression analysis. Research Policy, 44(4), 819–832. https://doi.org/10.1016/j.respol.2015.01.010
Czarnitzki, D., & Hussinger, K. (2018). Input and output additionality of R&D subsidies. Applied Economics, 50(12), 1324–1341. https://doi.org/10.1080/00036846.2017.1361010
Czech Statistical Office. (2019, January 25). Ukazatele VaV za podnikatelský sektor. https://www.czso.cz/csu/czso/2-ukazatele-vav-za-podnikatelsky-sektor-c7jv4q1teh
de Rassenfosse, G., & van Pottelsberghe de la Potterie, B. (2011). On the price elasticity of demand for patents. Oxford Bulletin of Economics and Statistics, 74(1), 58–77. https://doi.org/10.1111/j.1468-0084.2011.00638.x
Deloitte. (2018). Tax and subsidy support for research and development activities: Evaluation of the survey in the Czech Republic. https://www2.deloitte.com/cz/cs/pages/about-deloitte/articles/ce-corporate-research-development-report.html
Drabkova, Z. (2017). CFEBT risk triangle of accounting errors and frauds – analytical tool of fraud risk management and reduction of information asymmetry between creators and users of accounting reports. In I. Jindrichovska & D. Kubickova, IFRS: global rules and local use (pp. 286–299). AngloAmerican University.
Dumont, M. (2019). Tax incentives for business R&D in Belgium – Third evaluation (Working Papers No. 04-19). Federal Planning Bureau, Belgium.
Edler, J., Berger, M., Dinges, M., & Gök, A. (2012). The practice of evaluation in innovation policy in Europe. Educational Research and Evaluation, 21(3), 167–182. https://doi.org/10.1093/reseval/rvs014
Einiö, E. (2014). R&D subsidies and company performance: Evidence from geographic variation in government funding based on the ERDF population-density rule. Review of Economics and Statistics, 96(4), 710–728. https://doi.org/10.1162/REST_a_00410
Ernst, C., & Spengel, C. (2011). Taxation, R&D tax incentives and patent application in Europe (ZEW Discussion Papers No. 11-024). ZEW. https://doi.org/10.2139/ssrn.1805762
Ernst, C., Richter, K., & Riedel, N. (2014). Corporate taxation and the quality of research and development. International Tax and Public Finance, 21(4), 694–719. https://doi.org/10.1007/s10797-014-9315-2
European Union. (2012). Commission Implementing Regulation (EU) No 995/2012 of 26 October 2012 laying down detailed rules for the implementation of Decision No 1608/2003/EC of the European Parliament and of the Council concerning the production and development of Community statistics on science and technology. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32012R0995
European Union. (2014). Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty. https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014R0651&from=CS
Eurostat. (2019, March 10). First estimates of Research & Development expenditure R&D expenditure in the EU increased slightly to 2.07% of GDP in 2017: Two thirds spent inthebusiness enterprise sector. Eurostat Press Office. https://ec.europa.eu/eurostat/documents/2995521/9483597/9-10012019-APEN.pdf/856ce1d3-b8a8-4fa6-bf00-a8ded6dd1cc1
Griffith, R., Miller, H., & Oconnell, M. (2014). Ownership of intellectual property and corporate taxation. Journal of Public Economics, 112, 12–23. https://doi.org/10.1016/j.jpubeco.2014.01.009
Griliches, Z. (2000). R&D, education, and productivity: a retrospective. Harvard University Press.
Guellec, D., & van Pottelsberghe de la Potterie, B. (2003). The impact of public R&D expenditure on business R&D*. Economics of Innovation and New Technology, 12(3), 225–243. https://doi.org/10.1080/10438590290004555
Income Tax Act. (1992). Act No. 586/1992 Coll., on Income Taxes, as amended. Czech Republic. https://www.mfcr.cz/
Klemens, B. (2016). A Boxing Match: Can intellectual property boxes achieve their stated goals? U.S. Department of the Treasury, Office of Tax Analysis. https://doi.org/10.2139/ssrn.2822575
Köhler, C., Laredo, P., & Ramme, R. (2012). The impact and effectiveness of fiscal incentives for R&D. (Nesta Working Paper No. 12/01). https://doi.org/10.22163/fteval.2012.91
Lokshin, B., & Mohnen, P. (2013). Do R&D tax incentives lead to higher wages for R&D workers? Evidence from The Netherlands. Research Policy, 42(3), 823–830. https://doi.org/10.1016/j.respol.2012.12.004
Lundvall, B. A., & Borrás, S. (2009). Science technology and inovation policy. In The Oxford handbook of innovation. Oxford University Press.
Ministry of Regional Development of the Czech Republic. (2018, December 10). Metodické doporučení pro oblast veřejné podpory. https://www.dotaceeu.cz/getmedia/a3fdbcee-45a7-440e-a891-dc21381b2b04/MD-verejna-podpora_v2.pdf.aspx?ext=.pdf
Nauwelaers, C. (2016). Public research and innovation policies and investment and their evolution since the crisis. In Science, research and innovation performance of the EU: A contribution to the open innovation, open science, open to the world agenda. European Commisison.
Nelson, R. (1959). The simple economics of basic scientific research. Journal of Political Economy, 67(3), 297–306. https://doi.org/10.1086/258177
Neubig, T., Galindo-Rueda, F., & Appelt, S. (2016). Fiscal incentives for R&D and innovation in a diverse world (OECD Taxation Working Papers No. 27). OECD Publishing.
Nilsen, Ø. A., Raknerud, A., & Iancu, D.-C. (2020). Public R&D support and firm performance: A multivariate dose-response analysis. Research Policy, 49(7), 104067. https://doi.org/10.1016/j.respol.2020.104067
Ognyanova, D. (2017, September). R&D tax incentives: How to make them most effective? (Working Paper). European Commission.
Pfeiffer, O., & Spengel, C. (2017). Tax incentives for research and development and their use in tax planning (ZEW Discussion Paper No. 17-046). ZEW. https://doi.org/10.2139/ssrn.3067926
Pisár, P., Ďurčeková, I., & Stachová, M. (2020). The contribution of innovation actors into business R&D funding – does the substitution effect of public support work in the EU? E&M Economics and Management, 23(1), 121–134. https://doi.org/10.15240/tul/001/2020-1-009
Schumpeter, J. A. (1934). The Theory of economic development: an inquiry into profits, capital, credit, interest, and the business cycle. Harvard University Press.
Schumpeter, J. A. (1954). History of economic analysis. Oxford University Press.
Skeie, Ø. B., Johansson, Å., Menon, C., & Sorbe, S. (2017). Innovation, patent location and tax planning by multinationals (OECD Economics Department Working Papers No. 1360). OECD Publishing.
Technology Agency of the Czech Republic. (2019, September 2). Analýza patentů českých původců dle jejich vlastnictví. TAČR. https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1& ved=2ahUKEwivvcXknvbkAhVwU98KHW1sBd4QFjAAegQIABAC&url=https%3A%2F%2Fwww.tacr.cz%2Fdokums_raw%2Fnovinky%2F190822_patenty_podle_typu_vlastnictvi.pdf&usg=AOvVa w3UE74RGCQNGNx8quir4v2N
The Organisation for Economic Co-operation and Development. (2009). OECD patent statistics manual. OECD Publishing. https://doi.org/10.1787/9789264056442-en
The Organisation for Economic Co-operation and Development. (2013). Definition, interpretation and calculation of the B index. OECD Publishing. https://www.oecd.org/sti/b-index.pdf
The Organisation for Economic Co-operation and Development. (2015). Frascati manual 2015: guidelines for collecting and reporting data on research and experimental development (Series: The Measurement of Scientific, Technological and Innovation Activities). OECD Publishing.
Toledano, P., Johnson, L., Sachs, L. E., & Tavares, T. (2016). Rethinking investment incentives: trends and policy options. Columbia University Press. https://doi.org/10.7312/columbia/9780231172981.003.0012
Warda, J. (2001). Measuring the value of R&D tax treatment in OECD countries. In OECD STI review No. 27. Special issue on new science and technology indicators (pp. 185–211). OECD Publishing.
Westmore, B. (2013). R&D, patenting and growth: the role of public policy (OECD Economics Department Working Papers No. 1047). OECD Publishing.