The Impact of Research and Development Tax Incentives on Colombia’s Manufacturing Sector: What Difference Do They Make?

July 1, 2008

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Valerie A Mercer-Blackman. The Impact of Research and Development Tax Incentives on Colombia’s Manufacturing Sector: What Difference Do They Make?, (USA: International Monetary Fund, 2008) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Do tax incentives for science and technology stimulate additional investment? We use detailed data on applications and acceptances for R&D tax incentives, a special survey, and for the first time, the science and technology module from the 2000-2002 Survey of Manufacturers database in Colombia to analyze this question. We estimate the effect of the R&D tax deduction instituted in Colombia using Zellner's Seemingly Unrelated Regressions method, and find that the elasticity of demand of R&D investment in manufacturing is quite high in Colombia compared to other countries, particularly for smaller firms, but that the direct benefit from existing policies is minimal. Overall, the results of the paper suggest that there is a great potential for such incentives to promote R&D investment in Colombia, but in their current form, they fail to target those firms that could benefit the most.

Subject: Current spending, Expenditure, Income and capital gains taxes, Tax allowances, Tax incentives

Keywords: R&D activity, R&D expenditure, R&D investment, Tax deduction, WP

Publication Details

Pages:

53
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2008/178
Stock No:

WPIEA2008178
ISBN:

9781451870367
ISSN:

1018-5941

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