Does Finland Need R&D Tax Incentives?

Koski HeliFornaro Paolo


In OECD countries, tax subsidies are widely used to increase incentives for companies to invest in research and development. Recent international research suggests that R&D tax support increases both R&D investment and patent applications. However, it is unclear what kind of R&D tax scheme provides the best incentives for companies to invest in research and development and generate innovation. There are considerable differences between the countries’ R&D tax relief schemes, not only in terms of the amount of tax relief but also in terms of the characteristics of the tax support scheme. Typically, a company can make a tax deduction from income tax based on the total volume of R&D costs underlying the relief.

Our empirical analysis among 35 OECD countries during 2000–2018 indicates that the generosity of the R&D tax subsidies positively relates to the R&D investment intensity of the corporate sector. Our study further suggests that the R&D intensity and the number of patent applications filed with the USPTO are higher in the countries that use either the incremental R&D tax scheme or the hybrid scheme involving incremental and volume-based R&D tax deduction possibilities.

Publication info

Results of research
Impact of R&D tax deductions on companies’ R&D investments and innovations
Research group
Growth, international trade and competition
ETLA Muistio - ETLA Brief 97
R&D tax incentives, R&D investments, Innovation policy, Patents
K34, L5, O3, O31