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Innovation-friendly taxation of multinational enterprises: patents in the context of growth and taxes

Author

Listed:
  • Jan Luksic
  • Jorg Peschner
  • Giuseppe Piroli

Abstract

We find that patents registered by multinational enterprises (MNEs) in tax havens help avoid taxes in the EU but fail to increase the total factor productivity (TFP) of EU-located group members. We conclude that many of those patents' prime purpose is not to make technology available and then diffuse it smoothly within the group. It is rather to avoid taxes in the EU by shifting profits to low-tax offshore entities. We suggest that implementing a comprehensive system of withholding taxes on outbound royalty payments could reduce profit-shifting associated with patents, thereby fostering more innovative and efficient uses of intellectual property.

Suggested Citation

  • Jan Luksic & Jorg Peschner & Giuseppe Piroli, 2026. "Innovation-friendly taxation of multinational enterprises: patents in the context of growth and taxes," EERI Research Paper Series EERI RP 2026/04, Economics and Econometrics Research Institute (EERI), Brussels.
    • Handle: RePEc:eei:rpaper:eeri_rp_2026_04
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    Keywords

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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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