Viewing 10 posts categorized under Taxation

The effects of R&D tax credits (SIFIDE scheme) on small and large firms in Portugal

February 27, 2024

Governments worldwide increasingly rely on incentive schemes to promote research and development (R&D) investment, foster innovation, and encourage economic growth. While in 2000, 19 out of the 38 OECD countries gave preferential tax treatment to business R&D expenditure, in 2022 this number increased to 33 countries. What is the effect of (R&D) tax credits on firms’ trajectory? Do firms become more efficient? Caption: Dynamic marginal effects on R&D-related expenditure from SIFIDE tax credits.

Exports response to changes in credit conditions

January 26, 2024

Exports represent one fourth of Portuguese GDP and are largely responsible for the economic recovery following the sovereign debt crisis. However, exports and exporters are also fragile as they display a strong dependence on bank credit. This paper studies the impact of an increase in the cost of credit for exporters. This increase is driven by a change in banking regulation (Basel III) which makes giving credit to exporters who sell in high-risk destinations more expensive for banks.

Multinationals and services imports from havens: when policies stand in the way of tax planning

March 16, 2023

Multinational groups have been in the spotlight because of their activities that shift profits to tax havens, allowing them to minimize corporate tax bills in high-tax countries. The literature has documented several strategies used by multinationals to shift profits. This paper studies one strategy for which systematic empirical evidence is relatively scarce: the use of intra-group services transactions. Under this route, the firms of the group located in high-tax countries may artificially inflate their costs by paying expensive fees for services (e.

R&D tax credit and firm behavior

July 18, 2022

Studies carried out to date assessed and compared the impact of public support for R&D activities, whether in direct funding (grants) or tax credits. This paper studies how these instruments’ affect R&D personnel. The growing knowledge orientation of the economy and society and changes in the labor market make investing in skills and their lifelong upgrading increasingly important. Skilled human capital for research, innovation, and economic development are crucial in sustaining the needs of a knowledge economy.

Local property tax reform and municipality spending efficiency

January 25, 2022

Local governments provide a plethora of public services. To finance themselves, local municipalities rely on self-generated revenues, mostly on taxation. At the same time voters usually advocate for tax and expenditure limitations. Voters’ desire to lower the price while wishing to maintain the existing level of public services, can be interpreted as pressure on local governments for increased efficiency. This study assesses the short-term impact on municipal efficiency that stems from the 2008 property tax reform.

The impact of R&D tax incentives in Portugal

August 4, 2021

Should governments intervene in the promotion of R&D and innovation? Are such policies effective? From a theoretical point of view, the answer to the first question seems consensual. In addition to the benefits from innovation at the firm-level, the fact that derived knowledge and new technologies can be disseminated throughout the economy, gives rise to social benefits that exceed private ones. As such, private R&D investment is usually lower than socially desirable, which justifies public intervention.

The repercussions of the 2011 VAT increase on the tourism industry

January 4, 2021

Does a significant increase in VAT rates harm the tourism industry and if so how much? This paper investigates the consequences of a large increase in VAT rates on firm profitability and survival. In 2011, the Portuguese government increased the VAT by ten percentage points on catering services, restaurant meals, and beverages. The tourism sector in Portugal represents the biggest sector of the economy, and is composed of many small and medium-size firms, which are generally affected the most by such tax changes, at the same time being essential contributors to job creation and economic development.

Reducing corporate taxes triggers high-quality entrepreneurship

February 13, 2020

This paper investigates the impact of corporate taxes on entrepreneurial activity using a quasi-natural experiment in Portugal. Before 2001, the corporate tax rate levied on start-ups in Portugal was 34%. The “Portuguese Tax Benefits for Inland Regions” (Benefícios Fiscais à Interioridade) implemented in 2001 reduced the corporate tax rate to 25% for all start-ups located in inland regions. After 2004, the tax rate was further reduced to 15%, and after 2007 it was reduced to 10%.

Evaluating the effects of the soda tax on prices and consumption in Portugal

October 3, 2019

More than 40 countries around the world and a handful of American cities have introduced, or are considering introducing, soda taxes. In addition to raising tax revenues, these instruments aim to reduce the consumption of products whose prices do not reflect their true social costs, by making them comparatively more expensive (and increasing awareness about the negative effects of their consumption). Tobacco and alcohol taxes are classic such examples. The same rationale applies to soda (and other unhealthy foods and drinks): excessive sugar intake from soda is associated with higher prevalence of diseases such as obesity and diabetes, with the costs of treating these diseases falling on everyone.

A lower VAT rate on electricity in Portugal

June 4, 2018

In late 2011, Portugal increased the statutory VAT rate on electricity from 6% to 23% as part of the austerity plan under the country’s international bailout. Naturally, this austerity measure met with widespread concern for its potentially negative effects on both economic performance and social justice. Seven years after its introduction, the country is facing a brighter economic outlook and a more positive outlook for its public finances. Nevertheless, there is no sign that authorities plan to reinstate the reduced VAT rate.