IDEAS home Printed from https://ideas.repec.org/p/cpb/discus/450.html
   My bibliography  Save this paper

Disentangling business- and tax-motivated bilateral royalty flows

Author

Listed:
  • Arjan Lejour

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Maarten van 't Riet

    (CPB Netherlands Bureau for Economic Policy Analysis)

Abstract

Multinational firms pay for the use of intellectual property (IP). The IP-rights may be located in another country where the royalty income is taxable. This taxation may differ between countries which offers opportunities for tax avoidance. This implies that bilateral royalty payments may not only be business motivated but may also be tax driven. We determine the shares of tax and business motivated flows. We estimate that at least 18% of the size of the flows is tax driven. The associated worldwide loss of tax revenue is between 6.5 and 16 billion US dollar.

Suggested Citation

  • Arjan Lejour & Maarten van 't Riet, 2023. "Disentangling business- and tax-motivated bilateral royalty flows," CPB Discussion Paper 450, CPB Netherlands Bureau for Economic Policy Analysis.
    • Handle: RePEc:cpb:discus:450
    DOI: 10.34932/0edy-v759
    as

    Download full text from publisher

    File URL: https://www.cpb.nl/sites/default/files/omnidownload/Discussion-Paper-450-Disentangling-business-and-tax-motivated-bilateral-royalty-flows.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.34932/0edy-v759?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Karkinsky, Tom & Riedel, Nadine, 2012. "Corporate taxation and the choice of patent location within multinational firms," Journal of International Economics, Elsevier, vol. 88(1), pages 176-185.
    2. Sebastian Beer & Ruud de Mooij & Li Liu, 2020. "International Corporate Tax Avoidance: A Review Of The Channels, Magnitudes, And Blind Spots," Journal of Economic Surveys, Wiley Blackwell, vol. 34(3), pages 660-688, July.
    3. Sunghoon Hong, 2018. "Tax treaties and foreign direct investment: a network approach," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(5), pages 1277-1320, October.
    4. Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
    5. Kanbur, Ravi & Keen, Michael, 1993. "Jeux Sans Frontieres: Tax Competition and Tax Coordination When Countries Differ in Size," American Economic Review, American Economic Association, vol. 83(4), pages 877-892, September.
    6. 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.
    7. Fuest, Clemens & Spengel, Christoph & Finke, Katharina & Heckemeyer, Jost H. & Nusser, Hannah, 2013. "Profit shifting and 'aggressive' tax planning by multinational firms: Issues and options for reform," ZEW Discussion Papers 13-078, ZEW - Leibniz Centre for European Economic Research.
    8. Dudar, Olena & Spengel, Christoph & Voget, Johannes, 2015. "The impact of taxes on bilateral royalty flows," ZEW Discussion Papers 15-052, ZEW - Leibniz Centre for European Economic Research.
    9. Jannick Damgaard & Thomas Elkjaer & Niels Johannesen, 2019. "What Is Real and What Is Not in the Global FDI Network?," IMF Working Papers 2019/274, International Monetary Fund.
    10. Maddalena Conte & Pierre Cotterlaz & Thierry Mayer, 2022. "The CEPII Gravity Database," Working Papers 2022-05, CEPII research center.
    11. Dischinger, Matthias & Riedel, Nadine, 2011. "Corporate taxes and the location of intangible assets within multinational firms," Journal of Public Economics, Elsevier, vol. 95(7), pages 691-707.
    12. Michael Overesch & Georg Wamser, 2014. "Bilateral internal debt financing and tax planning of multinational firms," Review of Quantitative Finance and Accounting, Springer, vol. 42(2), pages 191-209, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Giulia Aliprandi & Thijs Busschots & Carlos Oliveira, 2023. "Mapping the global geography of shell companies," Post-Print hal-04563980, HAL.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Arjan Lejour & Jan Möhlmann & Maarten ’t Riet, 2022. "The immeasurable tax gains by Dutch shell companies," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(2), pages 316-357, April.
    2. Giuseppe Pulina & Skerdilajda Zanaj, 2022. "Tax competition and phantom FDI," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(6), pages 1342-1363, December.
    3. Arjan Lejour & Jan Möhlmann & Maarten van 't Riet & Thijs Benschop, 2019. "Dutch Shell Companies and International Tax Planning," CPB Discussion Paper 402, CPB Netherlands Bureau for Economic Policy Analysis.
    4. Pfeiffer, Olena & Spengel, Christoph, 2017. "Tax incentives for research and development and their use in tax planning," ZEW Discussion Papers 17-046, ZEW - Leibniz Centre for European Economic Research.
    5. Annette Alstadsæter & Julie Brun Bjørkheim & Ronald B. Davies & Johannes Scheuerer, 2022. "Pennies from Haven: Wages and Profit Shifting," CESifo Working Paper Series 9590, CESifo.
    6. Baptiste Souillard, 2020. "Import Competition And Corporate Tax Avoidance: Evidence From The China Shock," Working Papers ECARES 2020-30, ULB -- Universite Libre de Bruxelles.
    7. S. Juranek & D. Schindler & A. Schneider, 2023. "Royalty taxation under tax competition and profit shifting," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(4), pages 1377-1412, November.
    8. Florence Lachet-Touya, 2016. "EU tax competition and tax avoidance: A multiprincipal perspective," Working papers of CATT hal-02939340, HAL.
    9. Lisa Evers & Helen Miller & Christoph Spengel, 2015. "Intellectual property box regimes: effective tax rates and tax policy considerations," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(3), pages 502-530, June.
    10. Garcia-Bernardo, Javier & Janský, Petr, 2024. "Profit shifting of multinational corporations worldwide," World Development, Elsevier, vol. 177(C).
    11. Sandro Montresor & Francesco Quatraro, 2015. "Key Enabling Technologies and Smart Specialization Strategies. European Regional Evidence from patent data," JRC Working Papers on Corporate R&D and Innovation 2015-05, Joint Research Centre.
    12. Joana Garcia, 2022. "Multinationals and services imports from havens: when policies stand in the way of tax planning," Working Papers w202214, Banco de Portugal, Economics and Research Department.
    13. Annette Alstadsæter & Salvador Barrios & Gaetan Nicodeme & Agnieszka Maria Skonieczna & Antonio Vezzani, 2018. "Patent boxes design, patents location, and local R&D," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 33(93), pages 131-177.
    14. Keuschnigg, Christian & Loretz, Simon & Winner, Hannes, 2014. "Tax Competition and Tax Coordination in the European Union: A Survey," Working Papers in Economics 2014-4, University of Salzburg.
    15. Makoto Hasegawa, 2023. "Territorial Tax Reform and Profit Shifting by US and Japanese Multinationals," National Tax Journal, University of Chicago Press, vol. 76(4), pages 771-804.
    16. Florence Lachet-Touya, 2016. "EU tax competition and tax avoidance: A multiprincipal perspective," Working Papers hal-02939340, HAL.
    17. Dhammika Dharmapala, 2014. "What Do We Know about Base Erosion and Profit Shifting? A Review of the Empirical Literature," Fiscal Studies, Institute for Fiscal Studies, vol. 35, pages 421-448, December.
    18. Ropponen, Olli, 2021. "Interest Limitation Rules and Business Cycles: Empirical Evidence," ETLA Working Papers 90, The Research Institute of the Finnish Economy.
    19. Becker, Johannes & Johannesen, Niels & Riedel, Nadine, 2020. "Taxation and the allocation of risk inside the multinational firm," Journal of Public Economics, Elsevier, vol. 183(C).
    20. Evers, Maria Theresia & Meier, Ina & Spengel, Christoph, 2014. "Transparency in financial reporting: Is country-by-country reporting suitable to combat international profit shifting?," ZEW Discussion Papers 14-015, ZEW - Leibniz Centre for European Economic Research.

    More about this item

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpb:discus:450. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/cpbgvnl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.