Can patent boxes improve the attractiveness of Germany as a business location?

Patent boxes are a tax instrument that grants companies lower tax rates on income from intellectual property (e.g. patents, software). The rationale often cited is to incentivize companies to be more innovative, to attract mobile investment, and to generate more efficient tax revenues by differentiating tax rates on more mobile income streams. Patent box regimes currently exist in 13 EU member states and several other countries. Germany does not have a patent box; a research bonus ("Forschungszulage") was introduced in 2019.The empirical literature suggests that patent boxes can have an impact on the economic activity of domestic companies, such as research and development (R&D), investment and employment. Patent box regimes without an obligation to perform R&D locally (without the OECD nexus principle) result in the relocation of patents and profit shifting. Since the preferential tax treatment depends on intellectual property rights, companies have an incentive to increase the number of such rights, but not necessarily their R&D or innovations.The impact of a patent box on R&D in Germany is expected to be positive but limited. Regarding labor market effects, highly qualified workers in Germany are currently considered to be at full employment. It is therefore unlikely that there will be an increase in the number of jobs for highly qualified workers, but rather a shift and crowding out due to wage effects. In this respect, the introduction of a patent box in Germany should primarily be seen as a measure to strengthen Germany's position in international tax competition and to curb profit shifting abroad.