EU Releases a Taxation Paper on R&D Under a CCCTB

An assessment of R&D Provisions under a Common Consolidated Corporate Tax Base written by Diego d’Andria, Dimitris Pontikakis and Agnieszka Skonieczna has been published by the European Commission in its Taxation Papers publications. The outcomes of the paper conclude that the CCCTB without an R&D incentive would significantly deteriorate incentives to invest in R&D.

Background

European Commission publishes the Taxation Papers to increase awareness of the work being done by the staff and to seek comments and suggestions for further analyses. These papers often represent preliminary work, circulated to encourage discussion and comment. Citation and use of such a paper should take into account its provisional character. The views expressed in the Taxation Papers are solely those of the authors and do not necessarily reflect the views of the European Commission.

R&D Incentive Under a CCCTB

The authors of the paper address R&D incentive under a recent proposal for a Common Consolidated Corporate Tax Base (CCCTB) across the European Union (EU). The paper evaluates whether and how the EU proposal for a Common Consolidated Corporate Tax Base (CCCTB) can be aligned with national tax policy choices in support of R&D.

"The paper presents the rationale for the inclusion of R&D provisions, quantifies the subsidy implied by alternative options using the user's cost approach and approximates aggregate impacts by means of simple extrapolations from elasticities found in literature," authors informed.

The CCCTB Without an R&D Incentive

The outcomes of the paper conclude that the CCCTB without an R&D incentive would significantly deteriorate incentives to invest in R&D. The authors propose alternative options and argue that the level of support should be ambitious to address the pressing need in the EU to invest more, stay globally competitive and reach the EU's target of investing 3% of its GDP in R&D.

"Importantly, to take full advantage of the opportunities offered by this tax reform, EU member states will have to coherently mobilize a range of policies and engage in complementary non-tax interventions in their national innovation systems. We conclude with a broad consideration of what these may be for the varied and variably developed business innovation capabilities found across the EU," the authors concluded.

Source: European Commission

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