Tax Credit Research Articles

Create and strengthening innovation ecosystem: roles of policy-affiliated transition intermediaries in latecomers

Purpose This study aims to explore the functions of policy-affiliated intermediaries and their roles in driving innovation in latecomers. Design/methodology/approach Latecomers have recently recognized the significance of an innovation ecosystem in transitioning to an innovation-driven economy. However, these countries encounter various market and system failures, making policy-affiliated transition intermediaries crucial in orchestrating innovation ecosystems. To achieve this, this study used a case study of a policy-affiliated intermediary and conducted interviews with 19 managers. The results from the content analysis revealed that innovation intermediaries in latecomers perform more comprehensive duties than those mentioned in the literature in the transition to innovation-based development. Findings Results show that the most important of policy-affiliated innovation intermediaries’ roles is orientation to the government and private sector market, attracting the participation of the private sector through the implementation of tax credits and the development of the corporate innovation ecosystem, developing science and technology parks, developing laboratory research infrastructure, supporting prominent and capable professors to create innovation networks, developing innovation zones around research institutions and leading universities and developing international scientific cooperation. These are new and important functions that innovation intermediaries should play in the transition process. Originality/value The research found that the innovation intermediary acts as a change agent in the mental model of other executive and decision-making bodies. Also result shows that this intermediaries can play more roles than what is mentioned in the literature for the development of innovation.

Economic Substantiation of Innovative Solutions for Direct Cooperation between Manufacturers and Restaurants

The traditional supply chain management between manufacturers and restaurants is not effective enough, considering its high costs, long turnaround times and reliance on third parties, which creates challenges to profitability and agility. This study aims to find out how this system helps optimise costs and supply chain management within the restaurant industry. Data was obtained through manager interviews for some middling and high-end restaurants presenting some operational issues confronted before and after the system was installed. A sample of 50 restaurants was selected using a stratified sampling technique, targeting various restaurant categories. A structured questionnaire was designed to interview restaurant managers on operational efficiency, cost reduction, and supply chain performance. The logistics costs, transaction costs and overall efficiency improvements, among other quantitative metrics, were monitored for the first and second intervals. To achieve this, the analysis used a difference-in-difference methodology, where restaurants before and after the implementation of the system were compared concerning specific performance indicators.Data was processed using SPSS Statistics 27, ensuring accuracy and reliability in the analysis. The findings show that wastage management cost efficiency has improved to 15%, while significant decreases have also been observed regarding transaction time and logistics costs. This also resulted in a substantial decline in time-to-order delivery which positively influences operational speed. Based on these findings, it is suggested that direct trade models would benefit the restaurant business in terms of cost savings and enhanced performance. The policy recommendations include promoting digital supply chain platforms using tax credits, assisting SMEs with government-sponsored projects, and facilitating direct interaction between producers and consumers.

Governance and policy implications of the Inflation Reduction Act: A European perspective

AbstractThis paper examines the US 2022 Inflation Reduction Act (IRA) alongside the EU's Net‐Zero Industry Act (NZIA) and Critical Raw Materials Act (CRMA) of 2023. We analyze their differential approaches to accelerating investment in clean technology, enhancing energy security and fortifying supply chains. Both regions share the objective of diminishing reliance on Chinese dominance in clean industries. The US seeks to stimulate private investment primarily via uncapped tax credits from 2022 to 2031, some of them subject to stringent domestic content requirements. The EU has reacted to the potential violation of World Trade Organization's rules and a possible green investment shift to the US In doing so, the EU is relying heavily on a regulatory strategy, with emphasis on the simplification of procedures. However, the EU's public funding model is vague and leaves details to the discretion of member states, risking fragmentation within the single market. Through the application of a dynamic computable general equilibrium model, we show that a 50% increase in demand for the IRA's uncapped tax credits could nearly triple US GDP outcomes by 2027. We highlight the contrast between the IRA's immediate fiscal incentives and the NZIA's regulatory approach, emphasising that the former are more attractive for firms.

OPTIMIZING ENERGY EFFICIENCY: A COMPREHENSIVE ANALYSIS OF BUILDING DESIGN PARAMETERS

This study explores the critical role of financial incentives, energy performance certifications, government policies, and advanced technologies in driving the adoption of energy-efficient building practices. Financial incentives, such as tax credits, rebates, and grants, are shown to significantly reduce the upfront costs associated with energy-efficient technologies, making these innovations more accessible to developers and building owners. The research highlights the effectiveness of energy performance certifications, like LEED and Energy Star, in enhancing the market value and energy performance of buildings by providing a structured framework for evaluating sustainability. Government policies and building codes, including the International Energy Conservation Code (IECC) and ASHRAE standards, are identified as key drivers of energy efficiency, compelling developers to meet stringent performance standards. Additionally, the integration of renewable energy technologies, such as solar panels and geothermal heat pumps, alongside smart building automation systems, plays a vital role in reducing energy consumption and improving operational efficiency. However, regional disparities in the availability of financial incentives and enforcement of policies present challenges to widespread adoption. The study concludes that expanding financial support, strengthening policy enforcement, and increasing public and industry awareness of the long-term financial and environmental benefits of energy-efficient buildings are essential for accelerating the transition to sustainable building practices. By addressing these challenges, the construction industry can make significant strides toward reducing energy consumption, lowering greenhouse gas emissions, and achieving global sustainability goals.

The Finance of Cybersecurity: Quantitative Modeling of Investment Decisions and Net Present Value

Despite the growing literature on cybersecurity investment, significant gaps remain unaddressed. First, the existing literature does not differentiate between cybersecurity expenditures, namely investment versus spending, despite the differences in their financial treatments. Second, the literature predominantly employs economic and risk-based models, in which the incorporation of financial parameters is limited. Third, the literature focuses on quantifying market (stock) loss of cyberattacks or conducting a cost-benefit analysis of cybersecurity investments but has yet to bridge these two areas. Thus, our objective is to introduce a new financial model, the Alpha Model, that addresses these gaps. We first provide distinctions between cybersecurity investment (capital expenditure) and spending (operational expenditure). Grounded in Relative Valuation Models and Optimal Capital Structure Theory, we quantify the upper-bound of optimal cybersecurity investment by utilizing book and market values of equity and debt. We also demonstrate that the Net Present Values (NPV) of cybersecurity investment is considerably lower than its book value by incorporating financial parameters of equity and debt financing, inflation-adjusted capital cost, and tax credits of depreciation and interest. To validate our model, we empirically test it by using data from the S&P500 index during 2018–2023. We offer practical implications to key stakeholders, including: (1) industry executives to financially quantify cybersecurity investments and ascertain their actual NPVs, individually and collaboratively with supply chain partners; (2) cybersecurity solution providers to promote business investments in cybersecurity; and (3) insurance providers to price premiums with higher NPVs than the corresponding investments. We also offer several avenues for further research.

A policy for the jobless youth in South Africa

This paper uses survey and tax administrative data to analyse the effects of a sizeable employer-borne payroll tax credit for young, low-wage workers in South Africa. We find fairly limited impacts of the wage subsidy on the employment of young, low-wage workers relative to two comparison groups: slightly older, low-wage workers and slightly higher-paid, young workers. We find evidence of increases in low-wage youth entry into employment, but these are too small to affect overall employment. However, the female employment rate has increased, and unemployment among women has dropped because of the policy. We find evidence to suggest that the policy has led to a rise in earnings, particularly for men and those earning around the maximum subsidy value.

A model for assessing the economic impact of renewable energy adoption in traditional oil and gas companies

The adoption of renewable energy presents significant economic implications for traditional oil and gas companies. This paper proposes a model for assessing the economic impact of integrating renewable energy into traditional oil and gas operations, focusing on cost efficiency, revenue potential, and overall financial performance. The model evaluates key metrics, including capital investment, operational cost savings, revenue generation from renewable energy projects, and potential impacts on profitability and shareholder value. By incorporating various renewable technologies such as solar, wind, and geothermal, the model provides a comprehensive framework for understanding the financial benefits and challenges associated with transitioning to cleaner energy sources. The model incorporates both direct and indirect economic impacts, such as reduced energy costs, enhanced energy security, and improved corporate reputation. It also considers the effects of regulatory incentives, including tax credits and subsidies, which can influence the financial viability of renewable energy projects. Additionally, the model examines potential risks and uncertainties, such as market volatility and technological limitations, which can affect the economic outcomes of renewable energy investments. Case studies of traditional oil and gas companies that have successfully integrated renewable energy are analyzed to illustrate the practical application of the model. These case studies demonstrate how companies have achieved cost reductions, diversified revenue streams, and enhanced their long-term financial resilience through renewable energy adoption. The paper concludes that while the initial investment in renewable energy technologies can be substantial, the long-term economic benefits—including cost savings, revenue growth, and alignment with sustainability goals—can significantly outweigh the challenges. By adopting the proposed model, oil and gas companies can better assess the economic implications of renewable energy integration and make informed decisions to drive sustainable growth and profitability.

The Child Tax Credit—Tax Policy as Health Policy

This Viewpoint advocates for a more expansive child tax credit by exploring existing research on the credit and health outcomes.

The expanded Child Tax Credit and economic wellbeing of low-income families

The expanded Child Tax Credit and economic wellbeing of low-income families

The Effects of the 2019 Earned Income Tax Credit Reform on Labor Supply

The Effects of the 2019 Earned Income Tax Credit Reform on Labor Supply

Techno-economic-environmental study of CO2 and aqueous formate solution injection for geologic carbon storage and enhanced oil recovery

As carbon capture, utilization, and storage (CCUS), carbon-dioxide enhanced oil recovery (CO2 EOR) has inherent shortcomings, such as inefficient oil recovery and carbon storage, and low storage security with mobile CO2. This paper presents a techno-economic-environmental analysis of using formate species, a product of CO2 electrochemical reduction, as an alternative carbon carrier for sequestration and EOR in a carbonate oil reservoir in the Gulf of Mexico Basin. CO2 injection, water-alternating-CO2 injection, and aqueous formate solution injection were compared using a compositional reservoir simulation model and an economic calculator. Formate solution injection yielded greater levels of oil recovery and net carbon storage, where the carbon-bearing species resided in the dense aqueous phase without having to rely on petrophysical trapping mechanisms (structural and capillary). The enhanced oil production, net carbon storage, and storage security can be promoted by providing formate-based CCUS with more incentives (e.g., greater tax credit) in comparison to CO2-based CCUS for EOR and the manufacture of chemicals and products. In establishing carbon storage incentive policies and regulations, policymakers should include alternative carbon carriers.

The Association of the Low-Income Housing Tax Credit Program and Intimate Partner Violence Related Emergency Department Visits

The Association of the Low-Income Housing Tax Credit Program and Intimate Partner Violence Related Emergency Department Visits

Breaking Menstrual Inequality: A Multidimensional Approach to Addressing Period Poverty in China

Menstrual poverty is a complex public health problem that cuts across economic, social, and cultural dimensions. It refers not only to women's inability to afford sanitary products due to economic difficulties, but also to a broader lack of relevant knowledge, privacy protection, and social awareness of the importance of menstrual health. China lacks specific policies to address menstrual equity, especially the social disparities between urban and rural areas. This study aims to explore effective policies and community-based interventions to alleviate menstrual poverty among low-income women and girls in China, taking into account economic, social, and educational factors. The study proposes a comprehensive range of intervention strategies through a literature review, qualitative research, and case studies, including tax credits, public health policies, community distribution programs, education system reform, private-sector partnerships with NGOs, economic empowerment, and social and cultural change. The findings highlight the importance of cross-sectoral collaboration, gender-sensitive policy development, and community engagement in addressing menstrual poverty.

Measuring and Mitigating Racial Disparities in Tax Audits

Abstract Tax authorities around the world rely on audits to detect underreported tax liabilities and to verify that taxpayers qualify for the benefits they claim. We study differences in Internal Revenue Service audit rates between Black and non-Black taxpayers. Because neither we nor the IRS observe taxpayer race, we propose and use a novel partial identification strategy to estimate these differences. Despite race-blind audit selection, we find that Black taxpayers are audited at 2.9 to 4.7 times the rate of non-Black taxpayers. An important driver of the disparity is differing audit rates by race among taxpayers claiming the Earned Income Tax Credit (EITC). Using counterfactual audit selection models to explore why the disparity arises, we find that maximizing the detection of underreported taxes would not lead to Black EITC claimants being audited at higher rates. Rather, the audit disparity among EITC claimants stems largely from a policy decision to prioritize detecting overclaims of refundable credits over other forms of noncompliance. Modifying the audit selection algorithm to target total underreported taxes while holding fixed the number of audited EITC claimants would reduce the share of audited taxpayers who are Black and would lead to more audits focused on accurate reporting of business income and deductions, fewer audits focused on the eligibility of claimed dependents, higher per audit costs, and more detected noncompliance.

The earned income tax credit (EITC) and time spent helping and caring for adults

AbstractThis is the first study to examine the effect of the Earned Income Tax Credit (EITC) on unpaid caregiving for adults, which could operate through the credit’s effects on labor supply and household income. Using a sample of unmarried mothers and data from the American Time Use Survey (ATUS), I employ a simulated benefit approach to generate causal estimates of the effect of EITC generosity on time use. I find that increases in average EITC benefits have differential effects on assisting adults by both the age of the EITC recipient and the relationship between the EITC recipient and the care recipient. No effect is estimated for the youngest group of unmarried mothers (ages 25–34), who increase employment without reducing time spent assisting adults. In contrast, the oldest group of unmarried mothers (ages 45–54) responds by increasing their propensity to assist their parents while maintaining their labor supply. Unmarried mothers aged 35–44 both increase their labor supply and spend more time assisting adult family members on the intensive margin, even as they are less likely to assist parents on the extensive margin, especially with chore help. Results for other types of time use (home production, leisure, childcare, education, sleep), as well as probability of multigenerational co-residence, help explain these shifts. For example, for the oldest group of unmarried mothers, increased co-residence with parents is estimated to occur and may facilitate this labor-caregiving balance. These results add to a growing body of evidence that the EITC affects recipients’ time allocation beyond paid work and that the effects of the EITC span across generations and households.

Navigating the Intersection of Input Tax Credit Restrictions and Corporate Social Responsibility in India

CSR is an important dimension of ethical and sustainable business practices, recent restrictions in the input tax credit under the GST regime pose important issues in the implementation of CSR. The article estimates the financial, operational, and reputational implications of the restrictions on ITC for the CSRs, calling on firms to adapt and innovate. They are strategies crucial for dealing with challenges concerning financial planning, prioritizing of only those initiatives with the best impact, collaboration, and advocacy can be done. Several strategic approaches can be applied by business to operate with the ITC provision on restrictions for CSR spending such as, enhanced financial planning, collaborative efforts, Innovating on CSR Approaches, Advocacy and Policy Engagement, Stakeholder Engagement and Communication, Business Strategy Integration with CSR, Diversification of Alternative Revenue Streams. Despite constraints in the regulatory environment, the commitment to CSR is very high, and it therefore brings about a positive influence on Indian society and sustainable development. The finding demonstrates that business implementing strategies for navigating ITC restrictions not only mitigate the financial strain due to ITC restrictions but also enhance operational efficacy to maintain competitive edge, improve financial health and strategic position.

Tax Dispute Analysis of Incorrect Vat Payment on Offshore Royalty Viewed From the Ease of Administration Principle (Case Study of PT X)

The purposes of this research are: (i) to analyse basic considerations from the Indonesian Tax Authority (ITA) in making regulations regarding the incorrect transfer of VAT on taxable services from outside customs territory which cannot be overbooked; and (ii) to analyse whether the administrative sanctions penalized to the taxpayer are appropriate from the ease of tax administration principle’s perspective. This study is using (i) VAT imposition on intangible taxable goods and services from outside the Indonesian customs territory; (ii) Ease of Administrative principles: certainty, efficiency, convenience of payment, and simplicity as theoretical references. The research is categorized as applied study with a qualitative method using qualitative data collection techniques through literatures and field studies (interview with various key informants from ITA, representatives of the taxpayers, and taxation experts and academia. The qualitative analysis on data/information was done via triangulating process with related theories, VAT laws and regulation, as well as expert opinions. Results of the study conclude that the basis of considerations of the ITA makes regulations for the utilization of Intangible Taxable Goods and Taxable Services from Outside the Customs Territory, which cannot be done with overbook because both offshore VAT objects are difficult to detect and can be used for tax avoidance modus by the taxpayers. The ownership of documentary evidence is actually a foreign party while the person who is supposed to make a transfer request is the owner of the document evidence, and the tax that has been deposited has become a tax credit and will not move to another place other than the state treasury because the tax credit is the taxpayer's right. Considerations taken by ITA have not met the theory of good tax administration because there has been no legal formulation related to this matter and ITA's accountability is still considered to be lacking in terms of supervision and control. Administrative sanctions penalized to PT X due to tax deposit errors are not in accordance with the ease of tax administration principle. Even though it is certainly stipulated in the prevailing law and regulation, but the procedure is so lengthy and detrimental to the taxpayer, increase and disrupt cash flow for business activities carried out by PT X. In terms of efficiency principle, the rejection of overbooking process creates additional compliance costs to the taxpayer, namely: fiscal financial cost, time cost and psychological cost and denial the facts that actually the fund/money have been transferred to the State Treasury. Implications of research: To provide examples of practice in the field of how complicated tax administration procedures can cause unnecessary losses for taxpayers if the tax regulations are not made by taking into account the principle of ease of tax administration. It is also recommended that the tax authorities should reduce administrative burden for the implementation of rights and fulfillment of tax obligations that are too rigid to be more friendly in order to make it easier for taxpayers to carry out their tax obligations and make themselves a facilitator for taxpayers to increase cooperative tax compliance. Originality/value: Ease of carrying out tax obligations for taxpayers must be something that is facilitated by the Tax Authority rather than being subject to penalties and this can be done, one way, through the application of the principle of ease tax administration in the formulation of tax regulations.

Promoting sustainable practices through green investments in the United Kingdom real estate industry

AbstractThis paper aims to examine how sustainable practices in the UK real estate industry are impacted by green investments through qualitative research, focusing on interviews with developers. The findings reveal that regulatory frameworks, market demand, financial incentives, corporate responsibility, and technological innovation are crucial factors in sustainable practices. There is a growing consumer demand for sustainable properties, supported by financial incentives like grants, tax credits, and green finance mechanisms such as green bonds. These bonds play a crucial role in promoting sustainable building practices, including energy‐efficient design and renewable energy integration. The research highlights motivators for stakeholders to participate in sustainability initiatives, including financial benefits, regulatory compliance, reputation, and consumer demand, despite challenges like perceived higher costs and regulatory hurdles. This research highlights specific implications for policymakers to design effective regulatory frameworks and incentives, investors to prioritize green investments through mechanisms like green bonds, and industry professionals to enhance corporate responsibility and meet growing consumer demand for sustainable properties.

Laying the foundations for negative emissions technologies: insights from a workshop

Abstract Pre-empting the worst consequences of climate change requires both mitigation of emissions from the global energy system and carbon dioxide removal through negative emissions technologies. Despite their nascence, negative emissions technologies are being incorporated into nationally determined contributions to achieve ambitious targets. It is therefore urgent to build a scaffolding that enables their expansion. Here, we report results from a workshop that brought together 34 prominent stakeholders, including scientists, engineers, energy system analysts, economists, experts in public policy, and policy makers. Participants discussed the likely cost and performance of these technologies; elucidated the opportunities and risks facing deployment; and envisioned how nations might build the necessary scaffolding for expansion. The majority narrative is that negative emissions technologies will have a bridging role in decarbonizing existing assets. Different models of deployment were proposed. Reaching the scale of deployment necessary to meet emissions targets is lengthy and expensive. Financial and regulatory risks are seen as greater barriers to deployment at scale than technological risk. Greater certainty regarding carbon pricing, production tax credits, and support for geological characterization and trunkline construction could reduce the former. Critical to expansion is a large-scale increase in low-carbon power production; the implementation of regulatory frameworks that remove uncertainty surrounding investment decisions; and prudent societal engagement.

A Lost Opportunity? Environmental Investment Tax Incentive and Energy Efficient Technologies

AbstractThis paper examines the impact of the Spanish Environmental Investment (EI) tax credit on adoption of green technologies by employing data from 2567 industrial firms for 6 years. It makes use of the sudden re-introduction of the tax incentive in March 2011, that aimed at favouring energy efficient over solely pollution abating technologies. I exploit this unexpected change and perform a difference-in-differences analysis to study its effect on green investments and as an extention on green employment outcomes. The policy change, aimed at switching financing to energy efficient technologies, is assessed as semi-effective. Admittedly, it decreased investment in end-of-pipe technologies, but the investment in superior cleaner production technologies increased only for the small firms (below 50 employees), which are especially vulnerable to the capital market failure. Unfortunately, the policy change had also a few unexpected indirect effects, firms in response to the tax incentive regime modification reduced the number of their green employees and their associated salaries. In stark contrast to the decision of the Spanish government on this EI tax credit, the results of this analysis seem to be quite encouraging for the continued use of this green fiscal policy and show that the modifications in the precision of the existing fiscal policies can be successful.