• Media type: E-Article
  • Title: An International Investigation of the Influence of Dividend Taxation on Research and Development Tax Credits
  • Contributor: Thomas, Deborah W.; Manly, Tracy S.; Schulman, Craig T.
  • Published: American Accounting Association, 2003
  • Published in: Journal of the American Taxation Association, 25 (2003) 2, Seite 35-54
  • Language: English
  • DOI: 10.2308/jata.2003.25.2.35
  • ISSN: 0198-9073; 1558-8017
  • Origination:
  • Footnote:
  • Description: This paper examines the ability of the research and development (R&D) tax credit to stimulate corporate R&D investment by considering it in the context of different forms of taxation for dividends. Many countries use an imputation system to eliminate the double tax on dividends found in a classical system. Using an international sample, we compare firms from different tax regimes that invest in R&D. The tax regime of interest offers both an R&D tax credit and an imputation credit for dividends. We develop a system of equations to estimate the companies' R&D expense and dividend payout. The primary result from the estimation is that firms operating in a tax regime that encourages both R&D and increased dividend payments spend less on R&D as they pay more in dividends. This inverse relation is greater than the inverse relation found between dividends and R&D in the full sample. We conclude that the effect of an R&D tax credit on private R&D spending depends on both the firms' commitment to dividend payments and the tax treatment of dividends.