Corporate Taxes, Patent Shifting and Anti-Avoidance Rules: Empirical Evidence

43 Pages Posted: 30 May 2018

See all articles by Martina Baumann

Martina Baumann

Government of the Federal Republic of Germany - Institute for Employment Research (IAB)

Tobias Böhm

University of Münster

Bodo Knoll

University of Hohenheim

Nadine Riedel

Oxford University CBT; University of Hohenheim

Date Written: April 16, 2018

Abstract

We empirically assess international corporate tax avoidance by strategic location of innovative output. The analysis draws on the universe of patent applications to the European Patent Office linked with data on multinational entities (MNEs) in Europe. Four findings emerge: Firstly, patent holdings are distorted towards low-tax countries. Secondly, patent location in low-tax countries is correlated with a geographic separation of R&D output and input. Thirdly, MNEs systematically sort high-value (low-value) patents to low-tax (high-tax) countries. Fourthly, the propensity to locate patent ownership in low-tax countries is significantly decreased if controlled foreign company rules are enacted in the MNE’s parent country. The tightening of transfer pricing legislations, in turn, exerts a weak negative effect on the location of patent ownership only.

Keywords: corporate patents, patent taxation, profit shifting, anti-avoidance rules

JEL Classification: H300, H700, J500

Suggested Citation

Baumann, Martina and Böhm, Tobias and Knoll, Bodo and Riedel, Nadine, Corporate Taxes, Patent Shifting and Anti-Avoidance Rules: Empirical Evidence (April 16, 2018). CESifo Working Paper Series No. 6967, Available at SSRN: https://ssrn.com/abstract=3186394 or http://dx.doi.org/10.2139/ssrn.3186394

Martina Baumann

Government of the Federal Republic of Germany - Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany

Tobias Böhm

University of Münster ( email )

Germany

Bodo Knoll

University of Hohenheim ( email )

Stuttgart
Germany

Nadine Riedel (Contact Author)

Oxford University CBT ( email )

Park End Street
Oxford, Oxfordshire OX1 1HP
United Kingdom

University of Hohenheim ( email )

Stuttgart
Germany

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