Tax incentives and investments in the EU : best practices and ways to stimulate private investments and prevent harmful tax practices

This study evaluates the effectiveness of tax incentives, with a particular focus on incentives for research and development (R&D). It analyses different design options for tax incentives and shows that input-based R&D tax incentives appear to be the most effective in stimulating additional R&D investment. Taking into account the lessons learnt from empirical evaluations and the restrictions imposed by Pillar Two, refundable, volume-based tax credits with a broad scope remain a convincing way forward for R&D tax incentives. This document was provided by the Policy Department for Economy and Growth at the request of the Subcommittee on Tax Matters (FISC).