Implied tax subsidy rates on R&D expenditures
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This database presents the 2018 edition of OECD time-series indicators of implied R&D tax subsidy rates for OECD member countries and five non-member economies (Brazil, People's Republic of China, Romania, Russian Federation, and South Africa) over the period 2000-2018, drawing on data collected in the OECD-NESTI R&D tax incentive surveys from 2007 to 2018. The 2018 edition of RDTAXSUB contains time-series estimates that are based on headline tax credit and allowance rates, by firm size and profitability scenario. Due to limited historical data availability, the estimates are not adjusted for provisions that bound the tax benefits received by firms (e.g. ceilings, thresholds). They therefore provide an upper bound for the marginal tax subsidy implied by R&D tax relief measures across countries over time. These estimates should not be confused with separate contemporary cross-sectional OECD estimates of marginal tax subsidy rates (OECD, 2018) that compute adjusted (weighted) tax credit/allowance rates for a number of countries based on available information on the proportion of eligible R&D subject to different marginal levels of relief (see 2017).
The tax subsidy rate is defined as 1 minus the B-index, a measure of the before-tax income needed by a “representative” firm to break even on USD 1 of R&D outlays (Warda, 2001). As tax component of the user cost of R&D, the B-Index is is directly linked to measures of effective marginal tax rates. Measures of tax subsidy rates such as those based on the B-index provide a convenient proxy for examining the implications of tax relief provisions. These provide a synthetic representation of the generosity of a tax system from the perspective of a generic or model type of firm for the marginal unit of R&D expenditure. To provide a more accurate representation of different scenarios, B-indices are calculated for “representative” firms according to whether they can claim tax benefits against their tax liability in the reporting period (OECD, 2013). When credits or allowances are fully refundable, the B-index of a firm in such a position is identical to the profit scenario. Carry-forwards are modelled as discounted options to claim incentives in the future, assuming a constant annual probability of returning to profit of 50% and a nominal discount rate of 10%.
For general and country-specific notes on the time-series estimates of implied marginal tax subsidy rates on R&D expenditures (based on the B-index), see http://www.oecd.org/sti/rd-tax-stats-bindex-notes.pdf.

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Comments or questions regarding RDTAXSUB can be sent to RDTaxStatsContact@oecd.org.

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OECD R&D tax subsidy (RDTAXSUB) dataset 2018/2

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COUNTRIES COVERED: Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom, and United States.
NON-MEMBER ECONOMIES: Brazil, Bulgaria, China, Colombia, Cyprus, Romania, Russian Federation, and South Africa.

Implied tax subsidy rates on R&D expendituresAbstract

This database presents the 2018 edition of OECD time-series indicators of implied R&D tax subsidy rates for OECD member countries and five non-member economies (Brazil, People's Republic of China, Romania, Russian Federation, and South Africa) over the period 2000-2018, drawing on data collected in the OECD-NESTI R&D tax incentive surveys from 2007 to 2018. The 2018 edition of RDTAXSUB contains time-series estimates that are based on headline tax credit and allowance rates, by firm size and profitability scenario. Due to limited historical data availability, the estimates are not adjusted for provisions that bound the tax benefits received by firms (e.g. ceilings, thresholds). They therefore provide an upper bound for the marginal tax subsidy implied by R&D tax relief measures across countries over time. These estimates should not be confused with separate contemporary cross-sectional OECD estimates of marginal tax subsidy rates (OECD, 2018) that compute adjusted (weighted) tax credit/allowance rates for a number of countries based on available information on the proportion of eligible R&D subject to different marginal levels of relief (see 2017).
The tax subsidy rate is defined as 1 minus the B-index, a measure of the before-tax income needed by a “representative” firm to break even on USD 1 of R&D outlays (Warda, 2001). As tax component of the user cost of R&D, the B-Index is is directly linked to measures of effective marginal tax rates. Measures of tax subsidy rates such as those based on the B-index provide a convenient proxy for examining the implications of tax relief provisions. These provide a synthetic representation of the generosity of a tax system from the perspective of a generic or model type of firm for the marginal unit of R&D expenditure. To provide a more accurate representation of different scenarios, B-indices are calculated for “representative” firms according to whether they can claim tax benefits against their tax liability in the reporting period (OECD, 2013). When credits or allowances are fully refundable, the B-index of a firm in such a position is identical to the profit scenario. Carry-forwards are modelled as discounted options to claim incentives in the future, assuming a constant annual probability of returning to profit of 50% and a nominal discount rate of 10%.
For general and country-specific notes on the time-series estimates of implied marginal tax subsidy rates on R&D expenditures (based on the B-index), see http://www.oecd.org/sti/rd-tax-stats-bindex-notes.pdf.

Contact person/organisation

Comments or questions regarding RDTAXSUB can be sent to RDTaxStatsContact@oecd.org.

Name of collection/source

OECD R&D tax subsidy (RDTAXSUB) dataset 2018/2

Reference period

YEARS COVERED: 2000 onward.

Date last updated

Release date: 29 March 2019.

Other data characteristics

The latest indicators and information on R&D tax incentives also feature on the dedicated OECD website Measuring R&D tax incentives, including the latest edition of OECD R&D tax incentive country profiles.

Geographic coverage

COUNTRIES COVERED: Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom, and United States.
NON-MEMBER ECONOMIES: Brazil, Bulgaria, China, Colombia, Cyprus, Romania, Russian Federation, and South Africa.