Cross-Country Evidence on the Preliminary Effects of Patent Box Regimes on Patent Activity and Ownership

Bradley, Sebastien; Dauchy, Estelle; Robinson, Leslie A.

doi:10.17310/ntj.2015.4.07

Cited by 53 publications

(53 citation statements)

References 8 publications

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“…According to our main findings, both a regular tax system and R&D tax incentives contribute to the determination of the extensive and intensive margins of the international collaboration in patents. These findings are in line with Ernst and Spengel (2011), Karkinsky and Riedel (2012), Griffith et al (2014), Böhm et al (2015), Dinkel and Schanz (2015), and Bradley et al (2015) and support the main hypothesis of our study showing that firms respond to taxation and fiscal incentives by strategically allocating their patents. This once again implies that some of the R&D tax incentives might be used for tax planning rather than fostering research and development.…”

Section: Resultssupporting

confidence: 93%

“…This implies that country-pairs place greater emphasis on a regular tax system than on available R&D tax incentives when choosing a partner for collaboration in patent development. This outcome is in line with Ernst and Spengel (2011), Karkinsky and Riedel (2012), Griffith et al (2014), Böhm et al (2015), Dinkel and Schanz (2015), Bradley et al (2015), and other previous studies which establish a significant negative impact of corporate income taxation on the location of intangible assets within multinational groups.…”

Section: Intensive Marginsupporting

confidence: 91%

“…The authors find that on average a one percentage point decrease in the tax rate on patent income leads to a 3% increase in the new patent applications. However, Bradley et al (2015) note that an increase in patent applications following an implementation of an IP Box does not necessarily imply an increase in innovation. They argue that an IP Box may encourage the patenting of pre-existing unpatented intangibles in addition to incentivizing new research activity.…”

Section: The Impact Of Output-oriented Randd Tax Incentivesmentioning

confidence: 97%

“…A few papers that attempt to evaluate the influence of IP Boxes on a firm's innovative activity are presented in Table 4. Bradley et al (2015) employ country-level data on patent applications filed at all major international patent offices and investigate the impact of an IP Box implementation on a country's innovation. The authors find that on average a one percentage point decrease in the tax rate on patent income leads to a 3% increase in the new patent applications.…”

Section: The Impact Of Output-oriented Randd Tax Incentivesmentioning

confidence: 99%

“…These studies argue that multinational enterprises strategically allocate intangible assets at low-tax subsidiaries in order to shift profits via royalty payments from high-tax to lowtax group members. Ernst and Spengel (2011), Karkinsky and Riedel (2012), Griffith et al (2014), Alstadsaeter et al (2015, Böhm et al (2015), Dinkel and Schanz (2015), and Bradley et al (2015) investigate the association between corporate taxation and the location of intangible assets using data on patent applications at the international patent registration offices.…”

Section: Literature Reviewmentioning

confidence: 99%

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Tax Incentives for Research and Development and Their Use in Tax Planning

Pfeiffer

Spengel

2017

SSRN Journal

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. This study provides a comprehensive analysis of various aspects of R&D tax incentives. It explains the economic justification behind the state support of research and development and summarizes its main types. In addition, it gives an overview of the existing R&D tax incentives in Europe and provides a thorough review of the empirical literature on the outcomes of fiscal incentives. Furthermore, the Devereux and Griffith model is used to determine the effective tax burden of multinational firms that reside in countries which implement R&D tax support and countries which do not. The model is developed further following Spengel and Elschner (2010) and Evers et al. (2015) to reflect a potential use of R&D tax incentives by multinational firms for tax planning. The hypothesis developed in the model is tested in an empirical estimation, where we employ the OECD data on international co-operation in patents. According to our main findings, there are at least two reasons why input-oriented R&D tax incentives, such as tax credits and tax super-deductions, constitute a more suitable instrument for fostering research and development than the output-oriented incentives, such as IP Boxes. First, there is robust evidence found in the empirical literature which shows the positive effect introducing inputoriented tax incentives has on a firm's innovative activity, whereas studies on output-oriented tax incentives are not able to support this argument. Secondly, according to our theoretical and empirical analyses, output-oriented R&D tax incentives may be used by multinationals for tax planning as opposed to their intended use of fostering research and development. Tax Incentives for Research and Development and Their Use in Tax PlanningOlenaKeywords: research and development; R&D; tax planning; corporate taxation IntroductionState support of research and development (R&D) is not only economically justified in numerous theoretical and empirical studies but is also enforced in many countries around the world. Fiscal incentives constitute one of the key instruments of state support of R&D, as they are easier to implement and are less complex to monitor than, for example, direct R&D grants or subsidies. There are various types of fiscal incentives for research and development, some of which focus on supporting the development or input phase of a research process, whereas others concentrate on the income-generating output phase. The first group of R&D tax incentives includes tax c...

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