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Patent boxes design, patents, location and local R&D

Author

Listed:
  • Annette Alstadsater

    () (University of Oslo)

  • Salvador Barrios

    () (European Commission, Joint Research Centre, IPTS)

  • Gaetan Nicodeme

    () (European Commission, ULB, CESifo and CEPR)

  • Agnieszka Maria Skonieczna

    () (European Commission)

  • Antonio Vezzani

    () (European Commission, Joint Research Centre, IPTS)

Abstract

Patent boxes have been heavily debated for their role in corporate tax competition. This paper uses firm-level data for the period 2000-2011 for the top 2,000 corporate R&D investors worldwide to consider the determinants of patent registration across a large sample of countries. Importantly, we disentangle the effects of corporate income taxation from the tax advantage of patent boxes. We also exploit a new and original dataset on patent box features such as the conditionality on performing research in the country and their scope. We find that patent boxes have a strong effect on attracting patents mostly due to their favourable tax treatment, especially so for high quality patents. Patent boxes with a large scope in terms of tax base definition have also stronger effects on the location of patents. The size of the tax advantage offered through patent box regimes are found to deter local innovative activities while R&D development conditions tend to attenuate this adverse effect. Our simulations show that on average countries imposing such development conditions tend to grant a tax advantage which is slightly larger than optimal from a local R&D impact perspective.

Suggested Citation

  • Annette Alstadsater & Salvador Barrios & Gaetan Nicodeme & Agnieszka Maria Skonieczna & Antonio Vezzani, 2015. "Patent boxes design, patents, location and local R&D," Working Papers 1518, Oxford University Centre for Business Taxation.
  • Handle: RePEc:btx:wpaper:1518
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    References listed on IDEAS

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    Cited by:

    1. Wolfram F. Richter, 2017. "Taxing Intellectual Property in the Global Economy: A Plea for Regulated and Internationally Coordinated Profit Splitting," CESifo Working Paper Series 6564, CESifo Group Munich.
    2. Dhammika Dharmapala, 2016. "The Economics of Corporate and Business Tax Reform," CESifo Working Paper Series 5864, CESifo Group Munich.
    3. Schwab, Thomas & Todtenhaupt, Maximilian, 2016. "Spillover from the haven: Cross-border externalities of patent box regimes within multinational firms," ZEW Discussion Papers 16-073, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    4. European Commission, 2016. "Tax Policies in the European Union: 2016 Survey," Taxation Survey 2016, Directorate General Taxation and Customs Union, European Commission.
    5. Richter, Wolfram F. & Breuer, Markus, 2016. "Pricing the Transfer of Intellectual Property: A Plea for Regulated and Internationally Coordinated Profit Splitting," Annual Conference 2016 (Augsburg): Demographic Change 145621, Verein für Socialpolitik / German Economic Association.
    6. Schwab, Thomas & Todtenhaupt, Maximilian, 2017. "Spillover from the Haven: Cross-border Externalities of Patent Box Regimes within Multinational Firms," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168148, Verein für Socialpolitik / German Economic Association.
    7. repec:ibn:ibrjnl:v:11:y:2018:i:5:p:159-166 is not listed on IDEAS
    8. d’Andria, Diego, 2016. "Why are researchers paid bonuses? On technology spillovers and market rivalry," Research Policy, Elsevier, vol. 45(10), pages 2105-2112.
    9. Diego d’Andria & Dimitris Pontikakis & Agnieszka Skonieczna, 2017. "Towards a European R&D Incentive? An assessment of R&D Provisions under a Common Corporate Tax Base," Taxation Papers 69, Directorate General Taxation and Customs Union, European Commission.
    10. repec:wfo:wstudy:59183 is not listed on IDEAS
    11. Martina Baumann & Tobias Böhm & Bodo Knoll & Nadine Riedel, 2018. "Corporate Taxes, Patent Shifting and Anti-Avoidance Rules: Empirical Evidence," CESifo Working Paper Series 6967, CESifo Group Munich.
    12. Stimmelmayr, Michael & Koethenbuerger, Marko & Liberini, Federica, 2016. "Is it Luring Innovations or just Profit? The Case of European Patent Boxes," Annual Conference 2016 (Augsburg): Demographic Change 145582, Verein für Socialpolitik / German Economic Association.
    13. repec:eee:tefoso:v:127:y:2018:i:c:p:38-56 is not listed on IDEAS
    14. Salvador Barrios & Diego d'Andria, 2016. "Estimating corporate profit shifting with firm-level panel data: time trends and industrial heterogeneity," JRC Working Papers on Taxation & Structural Reforms 2016-07, Joint Research Centre (Seville site).
    15. Dudar, Olena & Voget, Johannes, 2016. "Corporate taxation and location of intangible assets: Patents vs. trademarks," ZEW Discussion Papers 16-015, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    16. Agustin Redonda, 2016. "Tax Expenditures and Sustainability. An Overview," Discussion Notes 1603, Council on Economic Policies.
    17. Marko Köthenbürger & Federica Liberini & Michael Stimmelmayr, 2018. "Is it just Luring Reported Profit? The Case of European Patent Boxes," CESifo Working Paper Series 7061, CESifo Group Munich.
    18. Alexander Coad & Nicola Grassano, 2016. "Disentangling the processes of firm growth and R&D investment," JRC Working Papers JRC103175, Joint Research Centre (Seville site).
    19. Pfeiffer, Olena & Spengel, Christoph, 2017. "Tax incentives for research and development and their use in tax planning," ZEW Discussion Papers 17-046, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

    More about this item

    Keywords

    Corporate taxation; patent boxes; location; patents; R&D; nexus approach;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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