Corporate Taxation and the Choice of Patent Location with Multinational Firms

Karkinsky, Tom and Riedel, Nadine (2009) Corporate Taxation and the Choice of Patent Location with Multinational Firms. Centre for Business Taxation WP 09/31.

[img]
Preview
PDF
Download (497kB) | Preview

Abstract

Corporate patents are perceived to be the key profit-drivers in many multinational enterprises (MNEs). Moreover, as the transfer pricing process for royalty payments is often highly intransparent, they also constitute a major source of profit shifting opportunities between multinational entities. For both reasons, MNEs have an incentive to locate their patents at affiliates with a relatively small corporate tax rate. Our paper empirically tests for this relationship by exploiting a unique dataset which links information on patent applications to micro panel data for European MNEs. Our results suggest that the corporate tax rate (differential to other group members) indeed exerts a negative effect on the number of patents filed by a subsidiary. The effect is quantitatively large and robust against controlling for affiliate size. The findings prevail if we additionally account for royalty withholding taxes. Moreover, binding `Controlled Foreign Company' rules tend to decrease the number of patent applications.

Item Type: Other Working Paper
Keywords: corporate taxation, multinational enterprise, profit shifting
Centre: Oxford University Centre for Business Taxation > CBT Working Papers
Date Deposited: 23 May 2012 15:43
Last Modified: 15 Oct 2015 02:18
URI: http://eureka.sbs.ox.ac.uk/id/eprint/3296

View statistics

Actions (login required)

Edit View Edit View