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

Jan Luksic, Jorg Peschner and Giuseppe Piroli

EERI Research Paper Series from Economics and Econometrics Research Institute (EERI), Brussels

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.

Keywords: Multinational enterprises; taxes; TFP; innovation. (search for similar items in EconPapers)
JEL-codes: D24 F38 H21 H25 O32 (search for similar items in EconPapers)
Date: 2026-01-04
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