Economic impacts of the research tax credit (CIR)

Context

With an annual tax expenditure of over 6 billion euros, the Research Tax Credit (CIR) is the main instrument for supporting innovation in France. The impact of this scheme on companies’ research and development (R&D) expenditure has been measured (see, in particular, previous work by the IPP), suggesting a causal effect of around one additional euro of private R&D expenditure for every euro of tax expenditure. However, a scheme of this scale is highly likely to have a profound impact on firms’ employment and investment behaviour, as well as on their economic performance.

Presentation

This study draws on comprehensive administrative data that have never before been used to evaluate the CIR, in order to provide as complete a picture as possible of its effects. We use the number of engineers reported in the employment data (DADS) to describe changes in the structure of employment within firms, and data from tax returns (BIC-IS) to describe firm performance. For descriptive purposes, the report conducts an ‘event study’ focusing on firms’ first use of the CIR, and utilises the sudden change in the tax credit rate resulting from the 2008 reform as a quasi-experimental source of variation. The project also uses data from tax audits relating to the CIR to highlight variations in its uptake and their effects.

Economic impacts of the research tax credit (CIR)

Context

Presentation

Research Team

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