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Disentangling business- and tax-motivated bilateral royalty flows

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  • 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
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    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

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