The Impact of Intangible Assets’ Mobility on Intangibles Location and Income Shifting: Trademarks vs. Patents

53 Pages Posted: 18 Aug 2022

See all articles by Cinthia Valle Ruiz

Cinthia Valle Ruiz

Catholic University of Lille - IESEG School of Management

Johannes Voget

University of Mannheim - Accounting and Taxation

Date Written: August 11, 2022

Abstract

Despite OECD efforts to combat profit shifting, recent literature shows that firms with higher ratios of intangible assets have increased income shifting activities. Intellectual property is used more than other forms of capital by MNCs to shift income from high to low tax jurisdictions. Although these insights are important, they have not shown which type of intangible assets are most important to firms’ income shifting strategies. We estimate a mixed logit model to investigate firms’ location choices for different types of intellectual property and how these choices facilitate income-shifting. By directly comparing decisions about patent and trademark locations, we show that trademarks exhibit a particularly high sensitivity to tax differentials. This finding aligns with theory that trademarks can be more mobile than patents, which can be sticky due to agglomeration effects. Despite the focus in prior literature on patents, we find that trademarks are more important than patents to explain firm’s income-shifting.

Keywords: intangible assets, patents, trademarks, tax planning, income shifting

JEL Classification: H25, F23, H26, H3

Suggested Citation

Valle Ruiz, Cinthia and Voget, Johannes, The Impact of Intangible Assets’ Mobility on Intangibles Location and Income Shifting: Trademarks vs. Patents (August 11, 2022). Available at SSRN: https://ssrn.com/abstract=4188135 or http://dx.doi.org/10.2139/ssrn.4188135

Cinthia Valle Ruiz (Contact Author)

Catholic University of Lille - IESEG School of Management ( email )

Socle de la Grande Arche
1 Parvis de la Defense
Puteaux, Paris 92800
France

Johannes Voget

University of Mannheim - Accounting and Taxation ( email )

Mannheim, 68131
Germany

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