Tax Incentives Boost Innovation

Research funding via the tax system has a positive effect on investment in innovation projects. This is the finding of a metastudy conducted by the ifo Institute that summarizes findings on quantitative evaluation studies in Europe, Japan, Canada, China, Australia, and the United States. In the study, success was most evident in those countries that incentivized research and development expenditure through the tax system, for example by offering tax credits or special depreciation options for material or personnel costs. The authors write that compared to direct project funding, tax incentives have considerable advantages that can be of particular benefit to small and medium-sized enterprises.