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Contact CorporateTaxStatistics@oecd.org. Including the subject line 'Effective Tax Rates for R&D' will help us to answer your enquiry more quickly.
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These indicators stem from the ongoing collaboration of the Centre for Tax Policy and Administration (CTPA) and the Directorate of Science, Technology and Innovation (STI). Data on the design of R&D tax incentives are collected as part of the annual OECD R&D tax incentive survey. The survey is conducted by STI in collaboration with members of the OECD R&D tax incentive network, formed by experts from the Working Party of National Experts on Science, Technology and Innovation and from the Working Party No.2 on Tax Policy and Statistics (WP2). Baseline tax depreciation rules and rates and other elements of the tax system such as allowances for corporate equity are obtained from the OECD Corporate Effective Tax Rates survey. This survey, conducted by the CTPA, engages experts of WP2. CIT rates come from the OECD Tax Database . The tax parameters and modelling of these provisions align with that used to compute Corporate Effective Tax  rates. The calculations of EATRs and the cost of capital for R&D build upon the same design features and the same modelling of R&D tax incentives as the B-Index .
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Percentage
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Units
Click to expand Date last updated
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29-07-2021
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This data will be updated each year.
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COUNTRIES COVERED: Australia, Austria, Belgium, Canada, Chile, Colombia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Israel, 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: Argentina, Brazil, Bulgaria, China, Croatia, Cyprus, Malta, Romania, Russian Federation, South Africa, and Thailand.
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R&D tax incentives that provide preferential tax treatment to firms’ expenditures on R&D exhibit very heterogeneous design features across jurisdictions, which come on top of existing differences in standard corporate income tax systems. Indicators based on forward-looking effective tax rates capture in a synthetic manner the effect of taxation on firms’ R&D investment decisions.

This dataset contains two new indicators based on the methodology derived in the OECD Taxation Working Paper No. 54 (González Cabral et al., 2021):

The effective average tax rate (EATR) for R&D measures the impact of taxation on R&D investments that earn an economic profit. Indicators of the EATR for R&D are useful to analyse decisions at the extensive margin (e.g. whether or where to invest in R&D). Comparing the EATRs for R&D investments across jurisdictions gives insights into the incentives provided by the tax system for the location of profitable R&D investments.

The user cost of capital for R&D measures the return that a firm needs to realise on an R&D investment before tax to offset all costs and taxes that arise from the investment, making zero economic profit. The cost of capital for R&D is useful to analyse decisions the intensive margin (e.g. how much to invest in R&D).

To assess the preferential tax treatment for R&D investments in relation to other investments, it is instrumental to calculate the EATR or the cost of capital for a comparable investment to which R&D tax incentives do not apply. By taking the difference between the estimate in the R&D and non-R&D case, it is possible to gauge the preferential tax treatment offered to R&D in a given jurisdiction, in isolation from baseline tax provisions available to all types of investments. By taking the difference between the two EATRs (R&D and non-R&D investment), it is possible to gauge the preferential tax treatment offered to R&D in a given jurisdiction, in isolation from baseline tax provisions available to all types of investments. The higher the difference between the two rates, the greater the preferential tax treatment provided for R&D investments.

These indicators focus on the incentives faced by large firms among which R&D is heavily concentrated and assume that firms are able to use in full their tax benefits, for other firm types see B-Index . Certain design features that limit tax benefits for R&D such as the presence of ceilings and thresholds are assumed not to be binding due to a lack of data reflecting the share of R&D expenditure or performers bound by these limitations. These estimates should be interpreted as an upper bound of the generosity of R&D tax incentives. The investment is assumed to be financed by retained earnings and estimates are based on a 3% real interest rate and 1% inflation scenario. Income-based tax incentives are not included in these estimates. General and country specific notes can be found in an explanatory annex .

These indicators stem from the ongoing collaboration of the Centre for Tax Policy and Administration (CTPA) and the Directorate of Science, Technology and Innovation (STI). Closely linked to these indicators is the B-Index , the tax component of the cost of capital abstracting from financing decisions, which is a well-established indicator in the R&D literature. Estimates of the EATR for R&D and the cost of capital for R&D build on the same modelling and input parameters as the B-Index. Together the three indicators provide a toolbox for policy-makers to analyse the impact of taxation on a wide range of firms’ R&D investment decisions.

Contact person/organisation
Contact CorporateTaxStatistics@oecd.org. Including the subject line 'Effective Tax Rates for R&D' will help us to answer your enquiry more quickly.
Direct source
These indicators stem from the ongoing collaboration of the Centre for Tax Policy and Administration (CTPA) and the Directorate of Science, Technology and Innovation (STI). Data on the design of R&D tax incentives are collected as part of the annual OECD R&D tax incentive survey. The survey is conducted by STI in collaboration with members of the OECD R&D tax incentive network, formed by experts from the Working Party of National Experts on Science, Technology and Innovation and from the Working Party No.2 on Tax Policy and Statistics (WP2). Baseline tax depreciation rules and rates and other elements of the tax system such as allowances for corporate equity are obtained from the OECD Corporate Effective Tax Rates survey. This survey, conducted by the CTPA, engages experts of WP2. CIT rates come from the OECD Tax Database . The tax parameters and modelling of these provisions align with that used to compute Corporate Effective Tax  rates. The calculations of EATRs and the cost of capital for R&D build upon the same design features and the same modelling of R&D tax incentives as the B-Index .
https://www.oecd.org/sti/rd-tax-stats.htmhttps://www.oecd.org/sti/rd-tax-stats.htmUnit of measure used
Percentage
Power codeUnitsDate last updated
29-07-2021
Link to Release calendar
This data will be updated each year.
Geographic coverage

COUNTRIES COVERED: Australia, Austria, Belgium, Canada, Chile, Colombia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Israel, 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: Argentina, Brazil, Bulgaria, China, Croatia, Cyprus, Malta, Romania, Russian Federation, South Africa, and Thailand.
Key statistical concept

R&D tax incentives that provide preferential tax treatment to firms’ expenditures on R&D exhibit very heterogeneous design features across jurisdictions, which come on top of existing differences in standard corporate income tax systems. Indicators based on forward-looking effective tax rates capture in a synthetic manner the effect of taxation on firms’ R&D investment decisions.

This dataset contains two new indicators based on the methodology derived in the OECD Taxation Working Paper No. 54 (González Cabral et al., 2021):

The effective average tax rate (EATR) for R&D measures the impact of taxation on R&D investments that earn an economic profit. Indicators of the EATR for R&D are useful to analyse decisions at the extensive margin (e.g. whether or where to invest in R&D). Comparing the EATRs for R&D investments across jurisdictions gives insights into the incentives provided by the tax system for the location of profitable R&D investments.

The user cost of capital for R&D measures the return that a firm needs to realise on an R&D investment before tax to offset all costs and taxes that arise from the investment, making zero economic profit. The cost of capital for R&D is useful to analyse decisions the intensive margin (e.g. how much to invest in R&D).

To assess the preferential tax treatment for R&D investments in relation to other investments, it is instrumental to calculate the EATR or the cost of capital for a comparable investment to which R&D tax incentives do not apply. By taking the difference between the estimate in the R&D and non-R&D case, it is possible to gauge the preferential tax treatment offered to R&D in a given jurisdiction, in isolation from baseline tax provisions available to all types of investments. By taking the difference between the two EATRs (R&D and non-R&D investment), it is possible to gauge the preferential tax treatment offered to R&D in a given jurisdiction, in isolation from baseline tax provisions available to all types of investments. The higher the difference between the two rates, the greater the preferential tax treatment provided for R&D investments.

These indicators focus on the incentives faced by large firms among which R&D is heavily concentrated and assume that firms are able to use in full their tax benefits, for other firm types see B-Index . Certain design features that limit tax benefits for R&D such as the presence of ceilings and thresholds are assumed not to be binding due to a lack of data reflecting the share of R&D expenditure or performers bound by these limitations. These estimates should be interpreted as an upper bound of the generosity of R&D tax incentives. The investment is assumed to be financed by retained earnings and estimates are based on a 3% real interest rate and 1% inflation scenario. Income-based tax incentives are not included in these estimates. General and country specific notes can be found in an explanatory annex .

These indicators stem from the ongoing collaboration of the Centre for Tax Policy and Administration (CTPA) and the Directorate of Science, Technology and Innovation (STI). Closely linked to these indicators is the B-Index , the tax component of the cost of capital abstracting from financing decisions, which is a well-established indicator in the R&D literature. Estimates of the EATR for R&D and the cost of capital for R&D build on the same modelling and input parameters as the B-Index. Together the three indicators provide a toolbox for policy-makers to analyse the impact of taxation on a wide range of firms’ R&D investment decisions.

Corporate Effective Tax Rates for R&D: The case of expenditure-based R&D tax incentivesCorporate Effective Tax Rates for R&D: The case of expenditure-based R&D tax incentivesEffective Tax rates for R&D Explanatory Annexhttps://www.oecd.org/tax/tax-policy/etrs-rd-modelling-notes.pdf