Corporate Income Tax, IP Boxes and the Location of R&D

Arbeitspapier

The paper discusses the effects of the corporate tax on local R&D expenditures by multinational enterprises (MNEs) when income from intellectual property (IP) may or may not benefit from a special IP regime. Our model shows that an increase of the standard corporate tax may have positive effects on the R&D expenditures in the country that carries out the corporate tax increase. The possible positive R&D effect results from a tax asymmetry: not all R&D returns are subject to the higher tax. First, since R&D creates a public good within the MNE, some of the R&D benefit is taxed at other countries’ tax rates that are not subject to the tax increase. Second, some of the R&D benefits are taxed at a lower IP regime tax rate. Therefore, a higher corporate tax, which increases value of the cost deductibility of R&D, may actually foster R&D. This expectation is empirically supported by country-by-country R&D data of U.S.-owned subsidiaries for countries that have an IP regime.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 9397

Classification and Topics

• Classification: Wirtschaft ; Business Taxes and Subsidies including sales and value-added (VAT) ; Tax Evasion and Avoidance ; Innovation; Research and Development; Technological Change; Intellectual Property Rights: General
• Subject: corporate income tax ; R&D ; intellectual property regimes ; patent box ; international profit shifting

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Shehaj, Pranvera ; Weichenrieder, Alfons
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/248942
• Last update: 09.03.20252025, 5:50 AM CET