A Boxing Match: Can Intellectual Property Boxes Achieve Their Stated Goals?

33 Pages Posted: 14 Aug 2016 Last revised: 31 Aug 2016

Ben Klemens

U.S. Department of the Treasury, Office of Tax Analysis (OTA)

Date Written: August 15, 2016

Abstract

A patent box, innovation box, or intellectual property box (IP box) is a tax incentive under which revenues associated with some forms of intellectual property are taxed at a rate lower than general revenues. This paper discusses the common characteristics of IP boxes and how they correspond to stated goals. It presents a model of international tax competition, and shows that the highest expected tax revenue from mobile IP for a country hosting a great deal of fixed, non-IP capital comes from assigning a single tax rate to profits from both mobile and fixed capital — that is, from not implementing an IP box. As a research and development (R&D) credit, several examples show that the IP box is more easily manipulated than a traditional credit on R&D expenses.

Keywords: intellectual property, tax competition, research and development, patent boxes, IP boxes

JEL Classification: C72, H25, O38, O31

Suggested Citation

Klemens, Ben, A Boxing Match: Can Intellectual Property Boxes Achieve Their Stated Goals? (August 15, 2016). Available at SSRN: https://ssrn.com/abstract=2822575 or http://dx.doi.org/10.2139/ssrn.2822575

Ben Klemens (Contact Author)

U.S. Department of the Treasury, Office of Tax Analysis (OTA) ( email )

1500 Pennsylvania Ave., N.W.
Washington, DC 22203
United States

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