Abstract
This article highlights the results of recent academic research on the impact of local profit taxes on establishments’ R&D activities in Germany (Lichter et al., forthcoming). It first presents the institutional setting of municipal finances and profit taxation at both the local and the federal level. The article then explains how the study under consideration estimates the causal effect of profit taxation on R&D using detailed establishment-level data and the institutional setting at hand. It further provides a short summary of the paper’s key results and underlying mechanisms. The article concludes by discussing the implications of the paper’s results for tax policy design.