The Effect of Intellectual Property Boxes on Innovative Activity & Effective Tax Rates

Bornemann, Tobias and Oßwald, Benjamin (2019) The Effect of Intellectual Property Boxes on Innovative Activity & Effective Tax Rates. WU International Taxation Research Paper Series, 2018-03. WU Vienna University of Economics and Business, Universität Wien, Vienna.


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We investigate whether and to what extent the adoption of an intellectual property box increases innovative activity and the extent to which different types of firms benefit financially. We examine the adoption of the intellectual property box in Belgium because it allows us to cleanly identify the impact on innovative activity and effective tax rates. Our results indicate an overall increase in innovative activity as proxied by patent applications, grants, and highly-skilled employment, at the expense of patent quality. We also provide evidence that firms with patents on average enjoy 7.2% to 7.9% lower effective tax rates, with the greatest financial benefits accruing to multinational firms compared to domestic firms. Within multinational firms, those without income shifting opportunities appear to benefit more than other multinationals with income shifting opportunities.

Item Type: Paper
Additional Information: Bornemann and Osswald gratefully acknowledge financial support by the Austrian Science Fund (FWF): W1235-G16. Laplante gratefully acknowledges support from the Wisconsin School of Business. Editors: Eva Eberhartinger, Michael Lang, Rupert Sausgruber and Martin Zagler (Vienna University of Economics and Business), and Erich Kirchler (University of Vienna)
Keywords: IP boxes, tax incentive, tax avoidance, income shifting
Classification Codes: JEL H21, H25
Divisions: Departments > Finance, Accounting and Statistics
Depositing User: Mohammad Al Hessan
Date Deposited: 15 Feb 2018 12:34
Last Modified: 22 Oct 2019 00:41


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