Karkinsky, Tom and Riedel, Nadine (2009) Corporate Taxation and the Choice of Patent Location with Multinational Firms. Centre for Business Taxation WP 09/31.
Download (497kB) | Preview
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|
Actions (login required)