Tax Incentives and Investments in the EU - Best practices and ways to stimulate private investments and prevent harmful tax practices

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).

Heckemeyer, Jost Henrich, Katharina Nicolay, Christoph Spengel, Daniela Steinbrenner and Sophia Wickel (2025), Tax Incentives and Investments in the EU - Best practices and ways to stimulate private investments and prevent harmful tax practices, Mannheim