Tax losses and ex-ante offshore transfer of intellectual property

Rishi Sharma, Joel Slemrod and Michael Stimmelmayr

Journal of Public Economics, 2023, vol. 226, issue C

Abstract: We develop a positive model of multinational firm behavior and analyze a firm’s incentive to transfer an intellectual property (IP) right of uncertain value offshore ex ante, i.e. before its success or failure is realized. Our analysis highlights two major aspects of this decision. First, an asymmetric treatment of project gains and losses in the home country creates an incentive to transfer IP to a foreign low-tax country to avoid potentially negative profits at home. These incentives exist even when IP is priced at a fair arms-length price and are further strengthened in the presence of R&D tax incentives. Second, when multinationals have private information about the probability of project success, they have an incentive to transfer their most promising IP ex ante.

Keywords: Intellectual property; Corporate taxation; Loss offset; Tax avoidance (search for similar items in EconPapers)
JEL-codes: D21 F23 H25 H26 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Tax Losses and Ex-Ante Offshore Transfer of Intellectual Property (2023)
Working Paper: Tax Losses and Ex-Ante Offshore Transfer of Intellectual Property (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:226:y:2023:i:c:s0047272723001494

DOI: 10.1016/j.jpubeco.2023.104967

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