The Atlas of Innovation is a project of IFP
R&D Tax Credits
Tax incentives that reduce the cost of private sector research and development investments, encouraging broader innovation across the economy.
R&D tax credits reduce the tax burden on companies that invest in research and development, effectively lowering the cost of innovation. These credits typically allow firms to deduct a percentage of their qualified research expenditures from their tax liability, making R&D investments more attractive. Unlike grants or contracts, tax credits provide broad-based support without requiring government selection of specific projects or companies.
Most developed economies offer some form of R&D tax credit, and evidence suggests they successfully increase private R&D spending. The U.S. Research and Experimentation Tax Credit, for example, has been credited with stimulating billions of dollars in additional private research investment. Countries like France and the UK have expanded their R&D tax incentives to attract innovative companies and boost economic competitiveness.
R&D tax credits work best when you want to encourage private sector innovation broadly without picking specific technologies or companies, when companies have tax liability to offset, and when you trust market signals to direct research toward valuable applications. They’re less effective for basic research with distant commercial applications or for encouraging R&D in specific priority areas that markets might neglect.