R&D Intensity and the Effective Tax Rate – A Meta-Regression Analysis

Journal of Economic Surveys, 31 (4): 988-1010, 2016

Posted: 28 Jun 2015 Last revised: 14 Dec 2017

See all articles by Thomas Belz

Thomas Belz

University of Mannheim

Dominik von Hagen

University of Mannheim - Department of Business Administration and Taxation

Christian Steffens

University of Mannheim

Date Written: November 1, 2016

Abstract

We apply meta-regression techniques to provide a quantitative review of the empirical literature on how research and development (R&D) expenses affect the effective tax rate (ETR). R&D expenses relate to a well-accepted profit shifting channel, strategic placement of intellectual property within a multinational entity. Using a unique hand-collected data set, we add a new perspective to the current base erosion and profit shifting (BEPS) state of research and debate, in three ways: First, observing that primary studies report mixed evidence on how R&D expenses affect ETR, we provide a consensus estimate for this effect. Second, we consider this effect in more detail by separating a tax accounting effect and a profit shifting effect, which to our knowledge has not yet been investigated. We detect that one-third of the R&D effect on the ETR is due to the tax accounting effect and could be mitigated via book-tax conformity. We further find that 10% of the profit shifting effect can be traced back to R&D tax credits. Third, our meta-regression reveals factors that are possible sources of variation and bias in previous empirical studies.

Keywords: Effective tax rate; Intangible assets; Meta-regression analysis; Profit shifting; R&D intensity; Tax accounting

JEL Classification: F23, H25, H26, M41

Suggested Citation

Belz, Thomas and von Hagen, Dominik and Steffens, Christian, R&D Intensity and the Effective Tax Rate – A Meta-Regression Analysis (November 1, 2016). Journal of Economic Surveys, 31 (4): 988-1010, 2016, Available at SSRN: https://ssrn.com/abstract=2623561 or http://dx.doi.org/10.2139/ssrn.2623561

Thomas Belz

University of Mannheim ( email )

Universitaetsbibliothek Mannheim
Zeitschriftenabteilung
Mannheim, 68131
Germany

Dominik Von Hagen (Contact Author)

University of Mannheim - Department of Business Administration and Taxation ( email )

D-68131 Mannheim
Germany

Christian Steffens

University of Mannheim ( email )

Universitaetsbibliothek Mannheim
Zeitschriftenabteilung
Mannheim, 68131
Germany

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