Using proprietary data obtained from a local tax office in China, I examine how tax aggressiveness affects a firm’s incentive to claim for R&D tax deductions and to invest in R&D. I argue that submitting a claim for R&D tax deductions increases the likelihood that a firm will become subject to a tax examination. Therefore, I predict that tax aggressive firms are less likely than non-aggressive firms to submit claims for R&D tax deductions because tax aggressive firms are keen to avoid the oversight of the tax authorities. Further, because tax aggressive firms are less likely than non-aggressive firms to submit claims for R&D tax deductions, I predict that tax aggressive firms have less incentive to invest in R&D. Consistent with these predictions, I find that tax aggressive firms are less likely to claim for R&D tax deductions and they invest less in R&D than non-tax aggressive firms.