Does Tax Complexity Hinder Innovation?
Governments around the world rely heavily on the tax system to encourage businesses to invest in research and development (R&D). With the United States among the early adopters in 1981, the R&D tax credit has become a staple of innovation policy around the world. The basic idea is simple: lowering the cost of R&D gives firms a stronger incentive to invest in innovation. But while the economic logic is straightforward, the tax rules governing these incentives often are not.