Corporate taxes and the location of intellectual property

Rachel Griffith, Martin O'Connell and Helen Miller

No 8424, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The literature suggests that tax rates on mobile activities should fall to zero. Intellectual property is very mobile and has grown in importance. Firms can use intellectual property to shift income offshore and reduce their corporate income tax liability. Yet most intellectual property is held in relatively high tax countries. We estimate the impact of corporate taxes on where firms hold patents. We consider domestic and international taxes, and control for the potential non-tax costs and benefits associated with different locations. We allow heterogeneity across industries, firm size and, most importantly, unobservable patent specific heterogeneity in the responsiveness of patent location to tax. Our results suggest that, on average, corporate tax rates have a negative impact on the likelihood of a firm choosing a location, and that there is substantial heterogeneity in responses. We simulate the impact of recent reforms that apply a lower tax rate to patent income, finding that they attract patent income but result in losses in government revenues.

Keywords: Corporate tax; Intellectual property; Multinational firms; Patent box (search for similar items in EconPapers)
JEL-codes: F21 F23 H3 O3 (search for similar items in EconPapers)
Date: 2011-06
New Economics Papers: this item is included in nep-acc, nep-ino, nep-ipr, nep-pr~ and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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