Quotation Shehaj, Pranvera. 2021. Corporate Income Tax, IP boxes and the Location of R&D. WU International Taxation Research Paper Series . (10)




The paper discusses the effects of the corporate tax on local R&D expenditures by multinational enterprises (MNEs) when income from intellectual property (IP) may or may not benefit from a special IP regime. Our model shows that an increase of the standard corporate tax may have positive effects on the R&D expenditures in the country that carries out the corporate tax increase. The possible positive R&D effect results from a tax asymmetry: not all R&D returns are subject to the higher tax. First, since R&D creates a public good within the MNE, some of the R&D benefit is taxed at other countries’ tax rates that are not subject to the tax increase. Second, some of the R&D benefits are taxed at a lower IP regime tax rate. Therefore, a higher corporate tax, which increases value of the cost deductibility of R&D, may actually foster R&D. This expectation is empirically supported by country-by-country R&D data of U.S.-owned subsidiaries for countries that have an IP regime.


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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal WU International Taxation Research Paper Series
Language English
Title Corporate Income Tax, IP boxes and the Location of R&D
Number 10
Year 2021
Reviewed? Y
URL https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3932968
DOI https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3932968
Open Access Y
Open Access Link https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3932968


Shehaj, Pranvera (Former researcher)
Institute for Austrian and International Tax Law IN (Details)
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