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Corporate income tax, IP boxes and the location of R&D

Author

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  • Pranvera Shehaj

    (Freie Universität Berlin, School of Business and Economics)

  • Alfons J. Weichenrieder

    (Goethe University Frankfurt
    Vienna University of Economics and Business
    SAFE
    CESifo)

Abstract

We discuss corporate tax effects on multinationals’ R&D. Theoretically, we find that a host country’s tax increase may boost local R&D expenditure: while R&D becomes deductible at a higher rate, this higher rate may not apply to all R&D returns. First, as R&D creates a public good within the MNE, some R&D returns are taxed at other countries’ tax rates. Second, some of the R&D returns are taxed at a lower IP regime tax rate. The positive tax rate effect is empirically supported by country-by-country R&D data of U.S.-owned subsidiaries for countries that have an IP regime.

Suggested Citation

  • Pranvera Shehaj & Alfons J. Weichenrieder, 2024. "Corporate income tax, IP boxes and the location of R&D," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(1), pages 203-242, February.
    • Handle: RePEc:kap:itaxpf:v:31:y:2024:i:1:d:10.1007_s10797-023-09812-x
    DOI: 10.1007/s10797-023-09812-x
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    Cited by:

    1. Haufler, Andreas & Schindler, Dirk, 2023. "Attracting profit shifting or fostering innovation? On patent boxes and R&D subsidies," European Economic Review, Elsevier, vol. 155(C).
    2. Katarzyna Bilicka & Michael Devereux & Irem Güçeri, 2023. "Tax-Avoidance Networks and the Push for a “Historic” Global Tax Reform," Tax Policy and the Economy, University of Chicago Press, vol. 37(1), pages 57-108.

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    More about this item

    Keywords

    Corporate income tax; R&D; Intellectual property regimes; Patent box; International profit shifting;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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