Economic impact of the French Research Tax Credit (CIR)

Motivation: With an annual tax expenditure of over 6 billion euros, the French Research Tax Credit (credit d’impôt recherche, CIR) is the main policy to support innovation in France. The effects of this programme on private R&D investment have been previously evaluated (see in particular previous research of the IPP), suggesting a causal effect of the order of an additional euro of private R&D per euro of tax expenditure. However, a scheme of this magnitude is likely to have a profound effect on the employment and investment behaviour of firms, as well as on their economic performance.

Project: This study exploits exhaustive administrative data never used before to assess the wider economic impact of the French Research Tax Credit. We use the number of engineers declared in Social Security data (DADS) to describe the transformation of the employment structure in firms which take-up the tax credit, and data from corporate tax returns (BIC-IS) to describe economic performance of affected firms. The report carries out, for descriptive purposes, an event study around the take-up of the research tax credit, and exploits the sudden change in the tax credit rate resulting from the 2008 reform as a source of exogenous variation. The project also exploits data from tax audits in order to estimate the impact on R&D investment and economic performances of a sudden reduction in the amount of tax credit following a negative tax audit.

Funding: Commission nationale d’évaluation des politiques d’innovation (CNEPI), France Stratégie.

Researchers: Laurent Bach, Antoine Bozio, Arthur Guillouzouic, Clément Malgouyres, Nicolas Serrano-Velarde.