Evaluation of tax incentives for research and development in Germany

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Germany currently lacks a specific tax incentive for R&D, unlike many other countries. This study aims to analyze and evaluate key aspects necessary for establishing such an incentive in Germany, considering both business and economic policy perspectives. It also offers insights applicable to other European countries. The research identifies relevant questions and outlines a framework for evaluating R&D tax incentives, providing an overview of various forms present in EU member states as of 2010. The discussion explores potential models for Germany, focusing on the incentive's impact on total tax payments and R&D costs through a simulation model. Sensitivity analyses examine different economic scenarios and model firms. Additionally, the study empirically analyzes how R&D tax incentives and corporate income tax burdens affect patenting behavior, utilizing firm-specific patent applications at the European Patent Office (EPO). A comprehensive political discussion includes projections of potential budgetary costs. The final focus is on tax burdens and overall fiscal costs, employing a micro-simulation model based on a financial statements database to quantify the effects of various R&D tax credit models.