Thinking Outside the Box: The Cross-border Effect of Tax Cuts on R&D
WU International Taxation Research Paper Series No. 2016-07
ZEW - Centre for European Economic Research Discussion Paper No. 16-073
64 Pages Posted: 4 Nov 2016 Last revised: 8 Mar 2018
There are 2 versions of this paper
Thinking Outside the Box: The Cross-border Effect of Tax Cuts on R&D
Spillover from the Haven: Cross-Border Externalities of Patent Box Regimes Within Multinational Firms
Date Written: March 1, 2018
Abstract
Abstract We analyze the cross-border effect of tax cuts on R&D activity in the context of profit shifting. A tax cut in one location of a multinational enterprise reduces the user cost of capital for the whole group if profit shifting is possible and exerts a positive cross-border effect on R&D output. Using micro-level data, we find an increase of patent output of 15% upon the implementation of a foreign tax cut for firms with cross-border links. In addition, we find that foreign tax cuts prohibiting profit shifting generate a negative cross-border effect on average patent quality.
Keywords: cross-border, taxation, innovation
JEL Classification: F23, H25, O31
Suggested Citation: Suggested Citation
