Marginal incentive effect

To examine the effects of particular tax credits on pharmaceutical R D investment, a more useful measure is the marginal incentive effect or marginal credit rate (5). This rate is the number of cents that a tax credit reduces the cost of an additional dollar that the taxpayer decides to spend on R D. The credit rate is a negative tax rate. Because of limitations on particular tax credits, the effective marginal credit rate can be different from the statutory rate. This chapter reviews what is known about the marginal credit rate associated with each of the several tax credit provisions affecting pharmaceutical operations. 

Marginal incentive effect See marginal credit rate. 

Catalyst performance must continually improve to keep a product technically superior. Successful catalyst research programs coupled with production cost minimization may allow a plant to be run at capacity while its competitor shuts down or operates at a lower capacity and reduced profit margin. In many instances, finding the competitive advantage is essential to business survival. Finding or making the most cost-effective catalyst is a strong incentive for catalysis research. 

The recent decline in registered unemployment to less than 3.4 millions in November 2007, however, can in part be explained by a positive economic environment with strong labour demand. Nevertheless, it is plausible to argue that more efficient placement and activation activities have also contributed to this development. There may be some motivation or threat effect of Hartz IV on the unemployed in the sense that the eventual transfer to means-tested and flat-rate UB II increases search intensity and reduces reservation wages during the receipt of UB I and later on. Some evidence from an employer survey points in this direction (Kettner and Rebien 2007). However, simulation studies show only marginal effects on labour supply (Amtz et al. 2007). At the same time, incentives to move from benefit receipt to work are still limited for long-term unemployed persons as are their chances on the labour market. 

The combination of a NMW with tax credits and other reforms has reduced the severity of the unemployment and poverty traps. Table 29 illustrates the impact of the Government s reforms on high effective marginal tax rates (EMTRs) between 1998 and 2007. Table 30 illustrates real terms increase in what the Government describes as the Minimum Income Guarantee between 1999 and 2007. These theoretical incentives are personalised through software packages used by front line advisers that enable them to provide individualised better off in work calculations for unemployed and other workless claimants. 

R D is in firms that face limitation, Bailey and Lawrence estimated that, on average, the marginal effective credit rate of the latest version of the credit is 12 to 13.5 percent. Regardless of the exact marginal rate, their calculations indicate that the 1989 version of the R D credit provides incentives to increase R D spending substantially greater than those of earlier versions. 

Other government incentives can focus on reducing the tax burden for which companies are liable, as a means to free up resources to fund investment. Effectively, this provides an additional margin that can make local products more competitive in the transition period, as companies learn to operate facilities more efficiently. Examples of incentives to achieve these intents are tax holidays and special depreciation provisions. The latter were once again used in India where companies... 

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