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Tax Policy for Innovation


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DP506-4.pdfAuthors
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Productivity, Trade, and Regional EconomiesJEL Code
H25, O32, O38
Paper Category Number
506
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).
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