Tax incentives and investments in the EU: Best practices and ways to stimulate private investments and prevent harmful tax practices

DOI:	https://doi.org/10.2861/3115266
URL:	https://op.europa.eu/en/publication-detail/-/publi...
Document Type:	Working paper
Year of publication:	2025
Place of publication:	Brussels
Publishing house:	European Parliament
ISBN:	78-92-848-2703-9 , 78-92-848-2702-2
Publication language:	English
Institution:	Business School > ABWL u. Betriebswirtschaftliche Steuerlehre II (Spengel 2006-) Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
Subject:	330 Economics
Abstract:	This study evaluates the effectiveness of tax incentives, with a particular focus on incentives for research and development (R&D). It analyses different design options for tax incentives and shows that input-based R&D tax incentives appear to be the most effective in stimulating additional R&D investment. Taking into account the lessons learnt from empirical evaluations and the restrictions imposed by Pillar Two, refundable, volume-based tax credits with a broad scope remain a convincing way forward for R&D tax incentives. This document was provided by the Policy Department for Economy and Growth at the request of the Subcommittee on Tax Matters (FISC).