Policy Forum: The Uneasy Case for a Canadian Patent Box

Canadian Tax Journal, 2017, Vol. 65, No. 1, p. 61

Posted: 4 May 2017

See all articles by Robin Boadway

Robin Boadway

Queen's University; CESifo (Center for Economic Studies and Ifo Institute); Centre Interuniversitaire sur le Risque, les Politiques Economiques et l'Emploi (CIRPEE)

Jean-Francois Tremblay

University of Ottawa - Department of Economics

Date Written: May 3, 2017

Abstract

Several countries, mainly European, have introduced patent boxes, which reduce the corporate tax rate applicable on income generated from successful research and development (R & D) expenditures. Quebec has implemented a form of patent box for manufacturing firms that generate income from patents developed in the province, and the Saskatchewan government has announced that it will follow suit. There have been calls for the federal government to introduce a patent box for Canada. The intent is to encourage firms to engage in R & D activity that leads to intellectual property and to exploit the innovations in Canada. In this article, the authors draw on the literature and experience with patent boxes elsewhere to review the case for a patent box as an element of R & D policy in Canada. They conclude that a dual approach to R & D incentives involving some combination of ex ante tax incentives and patent boxes is reasonable, especially if patent box support encompasses a variety of forms of intellectual property. At the same time, if patent boxes are introduced, they should conform to the guidelines set out by the Organisation for Economic Co-operation and Development, in the base erosion and profit shifting (BEPS) action plan, which restrict eligibility by conditions ensuring domestic development of patents.

Keywords: corporate income taxes; innovations; patents; tax incentives

Suggested Citation

Boadway, Robin and Tremblay, Jean-Francois, Policy Forum: The Uneasy Case for a Canadian Patent Box (May 3, 2017). Canadian Tax Journal, 2017, Vol. 65, No. 1, p. 61, Available at SSRN: https://ssrn.com/abstract=2962318

Robin Boadway (Contact Author)

Queen's University ( email )

99 University Avenue
Kingston K7L 3N6, Ontario
Canada
613-533-2266 (Phone)
613-533-6668 (Fax)

HOME PAGE: http://qed.econ.queensu.ca/pub/faculty/boadway/

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre Interuniversitaire sur le Risque, les Politiques Economiques et l'Emploi (CIRPEE)

Ste-Foy, Quebec G1K 7P4
Canada

Jean-Francois Tremblay

University of Ottawa - Department of Economics ( email )

200 Wilbrod Street
Ottawa, Ontario K1N 6N5
Canada
6135625800(1688) (Phone)

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