Working Paper: NBER ID: w24843
Authors: Fabian Gaessler; Bronwyn H. Hall; Dietmar Harhoff
Abstract: A “patent box” is a term for the application of a lower corporate tax rate to the income derived from the ownership of patents. This tax subsidy instrument has been introduced in a number of countries since 2000. Using comprehensive data on patents filed at the European Patent Office, including information on ownership transfers pre- and post-grant, we investigate the impact of the introduction of a patent box on international patent transfers, on the choice of ownership location, and on invention in the relevant country. We find that the impact on transfers is small but present, especially when the tax instrument contains a development condition and for high value patents (those most likely to have generated income), but that invention itself is not affected. This calls into question whether the patent box is an effective instrument for encouraging innovation in a country, rather than simply facilitating the shifting of corporate income to low tax jurisdictions.
Keywords: patent box; tax policy; innovation; patent transfers
JEL Codes: H25; H32; K34; O34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| introduction of a patent box (H26) | transfer of patents out of a country (O34) |
| introduction of a patent box (H26) | transfers into a country (F24) |
| introduction of a patent box (H26) | inventive activities (O31) |
| introduction of a patent box (H26) | patent filings (O34) |
| introduction of a patent box (H26) | R&D spending (O32) |
| patent box presence (O39) | patent transfers (O34) |
| patents transferred in response to a patent box (O38) | value of patents (O34) |