Tax incentives for R&D are often considered to have certain advantages over direct support for R&D, such as procurement of R&D or grants. As a market-based tool aimed at reducing the marginal cost of R&D activities, they allow firms to decide which R&D projects to fund. They are expected to lead to an increase in private investment in R&D and in turn to a rise in innovation outcomes and ultimately to higher long-run growth. They can also boost R&D start-up decisions. Potential downsides include 1) higher wage levels for researchers because more R&D increases demand for their skills (hence part of the government foregone revenue dilutes in rising cost instead of a volume increase) and 2) (re)location of R&D activities (tax competition between countries or between regions).