Competition between countries on research & development (R&D) investments has never been fiercer as more countries try to increase their domestic R&D and become innovation-based economies. At the same time, the effort to curtail the ability of multinational entities to avoid taxation by shifting income to low-tax jurisdictions has become a top priority in the United States, the G20 and the OECD. The tension between these trends has received little attention from policy makers and analysts. This article contributes to the literature by presenting an integrated approach to designing optimal R&D tax benefits and assessing the effect of tax reform proposals on incentives for R&D investment.