Taxation
13592 mots
55 pages
Corporate Taxation and the Choice of Patent Location within Multinational FirmsTom Karkinsky Nadine Riedel
CESIFO WORKING PAPER NO. 2879
CATEGORY 1: PUBLIC FINANCE DECEMBER 2009
An electronic version of the paper may be downloaded • from the SSRN website: www.SSRN.com • from the RePEc website: www.RePEc.org • from the CESifo website: www.CESifo-group.org/wp
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CESifo Working Paper No. 2879
Corporate Taxation and the Choice of Patent Location within Multinational Firms
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. JEL Code: H25, F23, H26, C33. Keywords: corporate taxation, multinational enterprise, profit shifting.
Tom Karkinsky Oxford University CBT Said Business School Park End Street UK – Oxford, OX1 1 HP United Kingdom tom.karkinsky@sbs.ox.ac.uk
Nadine Riedel Oxford University CBT Said Business School Park End Street UK – Oxford, OX1 1 HP United Kingdom nadine.riedel@sbs.ox.ac.uk
November 3, 2009 We are indebted to the Institute for Fiscal Studies (IFS), especially