Fiscal Impact of Tax Incentives for Business Research and Development
Fiscal Impact of Tax Incentives for Business Research and Development
There is an ongoing debate about the introduction of tax incentives for business research and development (R&D) in Germany. The motivation for such an indirect form of subsidies for R&D depends on the size of the business unit. The most important economic reason is the incomplete use of the economic return from R&D projects by the financing entrepreneur, whereas the social rate of return from R&D is expected to be much higher. As a result, the business investments in R&D are expected to be below the social optimal level. This holds especially true for SME which are expected to be restricted by less favorable financing conditions. There is therefore an increased interest to get more information about the impact of tax incentives for R&D in Germany. Especially important for political discussions are the expected fiscal impacts, which thus are the main objective of this project.