Measuring tax incentives for R&D (article)
By Kenneth J. McKenzie
from International Tax and Public Finance Vol 15 Iss 5 Oct 2008, pp. 563 - 581
"A methodology for measuring the user cost of intangible R&D capital is developed. In contrast to the way in which the Hall–Jorgenson–King–Fullerton (HJKF) approach to measuring the user cost of capital, and the related notion of the effective marginal tax rate on capital, is typically applied to intangible R&D capital, the methodology takes explicit account of the microeconomic foundations of R&D in order to aggregate the user costs of the various inputs used in the production of R&D. Illustrative calculations are presented for Canadian provinces which show that relative to the methodology developed here, the standard approach substantially overstates the tax subsidy offered to intangible R&D capital. "