 Attracting profit shifting or fostering innovation? On patent boxes and R&D subsidiesAndreas Haufler and Dirk Schindler European Economic Review, 2023, vol. 155, issue C Abstract: Many countries have introduced patent box regimes in recent years, offering a reduced tax rate to businesses for their IP-related income. In this paper, we analyze how countries set optimal policies when both patent box regimes and R&D subsidies can be used to promote innovation. We show that patent box regimes emerge endogenously under policy competition, but never under policy coordination. Also, a partial tax coordination that abolishes patent box regimes but retains competition in corporate tax rates and R&D subsidies is welfare-improving in most cases. In this setting, policy competition is shifted to R&D subsidies, which cannot be used to attract profit shifting. Finally, we compare the competition for mobile patents with the competition for mobile R&D units and show that enforcing a nexus principle is likely to reduce the aggressiveness of patent box regimes. Keywords: Corporate taxation; Profit shifting; Patent boxes; R&D tax credits; Tax competition (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:155:y:2023:i:c:s0014292123000752 DOI: 10.1016/j.euroecorev.2023.104446 Access Statistics for this article European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer More articles in European Economic Review from Elsevier |
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