Tax Policy for Innovation
A large number of countries around the world now provide some kind of tax incentive to encourage firms to undertake innovative activity. This paper presents the policy rationale for these incentives, discusses their design and potential effectiveness, and reviews the empirical evidence on their actual effectiveness. The focus is on the two most important and most studied incentives: R&D tax credits and super deductions, and IP boxes (reduced corporate taxes in income from patents and other intellectual property).
I thank Laurie Ciaramella, Fabian Gaessler, Ben Jones, Jacques Mairesse, and James Poterba for helpful comments on an earlier draft. Prepared for the NBER Conference on Innovation and Public Policy, Washington, DC, 13 March 2020. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.
Tax Policy for Innovation, Bronwyn H. Hall. in Innovation and Public Policy, Goolsbee and Jones. 2021