SIFIDE’s Double Impact in Portugal: Boosting R&D and Optimizing Taxes

Abstract

Economic growth is closely linked to innovation, with R&D playing a key role in generating new knowledge, products, and processes. In Portugal, public policies support R&D through financial incentives and tax benefits. This article examines the relationship between economic growth and R&D investment from both macroeconomic and microeconomic perspectives, focusing on national outcomes and firm-level performance, emphasizing the role of tax incentives in private R&D. Using a linear regression model, we find that innovation-intensive firms investing in R&D exhibit higher levels of tax planning, partly reflecting the direct effect of R&D tax incentives (SIFIDE), and potentially linked to more accurate tax management practices. Our findings align with international evidence while addressing a gap in the Portuguese context. The findings provide insights for policymakers and business leaders, emphasizing the need to monitor private R&D investments supported by SIFIDE and assess their real economic impact, given the scheme’s substantial fiscal cost.