Taxes, firm heterogeneity and the location of intellectual property
Lead Research Organisation:
Institute for Fiscal Studies
Department Name: IFS Research Team
Abstract
Abstracts are not currently available in GtR for all funded research. This is normally because the abstract was not required at the time of proposal submission, but may be because it included sensitive information such as personal details.
People |
ORCID iD |
| Rachel Griffith (Principal Investigator) |
Publications
Helen Miller (Author)
(2010)
The location of intellectual property and corporate taxes
Helen Miller (Speaker)
(2010)
The location of intellectual property and corporate taxes
Rachel Griffith (Author)
(2010)
Corporate taxes and the location of intellectual property
Rachel Griffith (Author)
(2011)
Corporate taxes and the location of intellectual property
| Description | Intellectual property is an important input into firms' production and driver of economic growth. Intellectual property is very mobile, and can often be separated from the location of real activities. Policy makers face the challenge of formulating effective policy in this environment. A number of European countries have recently introduced a Patent Box - a reduction in the rate of corporation tax for the income derived from patents. This project develops and estimates a model of where firms hold intellectual property in order to study the impact of corporate taxes; we apply it to data on the location of firms' patents. Our key contribution to the academic literature is to allow flexibility in the way firms respond along unobservable dimensions; we introduce unobserved heterogeneity into a model of location choice. This is important because it helps to provide more realistic substitution patterns across locations. Our results suggest that, on average, higher corporate taxes reduce the likelihood that a firm chooses a location, but there is significant variation around the mean response. We use the model to simulate the impact of recent Patent Box proposals and find that they do attract patent income but result in substantial losses in government revenues. Initial results suggest that, while there is a high degree of co-location of patent holdings and the underlying research, there is evidence of higher degrees of separation when there are sufficient tax incentives. |
| Exploitation Route | One of our key aims in this project was to contribute to the academic literature. The central output of this project so far is the paper: Griffith, R., Miller, H., and O'Connell, M. (2011) 'Corporate taxes and the location of intellectual property'. We have submitted this paper to the Journal of Public Economics. Professor Rachel Griffith (the PI) and Helen Miller presented versions of this paper at various stages of progress to a range of audiences. - Rachel Griffith presented at a number of academic seminars, including: Michigan University, Stockholm University, the University of Oxford, the University of Nottingham and at a conference in honour of Jacques Mairesse at ENSAE, Paris. - Helen Miller presented this work at a number of academic conferences, including: Royal Economic Society (UK), International Institute of Public Finance (US), Centre for European Economic Research (ZEW, Germany), European Association for Research in Industrial Economics (Sweden), and the Institute for Fiscal Studies. She visited Bruegel (a European policy think tank) for a week (with joint funding from the EU) to present this paper and discuss related issues with academics and policy makers there to gain greater insight into the views from other European countries. We have ensured that our work is widely available (all outputs are available on the IFS and ESRC websites) and accessible to a broad audience. We wrote a number of non-technical pieces, including a Briefing Note, an observation and a Vox column article. We produced these at an early stage of our research to report initial findings and ensure that we contributed to the debate in a timely fashion. We engaged directly with policymakers and stakeholders around key policy issues. We held a workshop at IFS that brought together speakers from government, industry and academia and was open to a broad audience. We had a number of informal meetings with policy makers (including those from HMRC and HMT) and Rachel Griffith gave a presentation at the HM Treasury Economists Conference on the topic. We submitted a formal response to the UK Government's consultation on the Patent Box proposal. The taxation of intellectual property more broadly has been an important part of recent policy debates (including modifications to the UKs CFC regime). Our work in this area has allowed us to comment in a timely fashion on such issues (in, for example, the IFS Green Budget 2011 and the IFS Post Budget briefing 2011), which has in turn been covered in the media. |
| Sectors | Communities and Social Services/Policy,Financial Services, and Management Consultancy,Government, Democracy and Justice |
| Description | We anticipate publishing two academic journal articles. One paper on tax and firm location choice is already submitted, the other paper on whether attracting income from intellectual property also attracts innovative activity is in preparation for submission. The introduction of a Patent Box and reforms to CFC rules are still live policy issues, and we expect our research to continue to have an impact on the policy debate in this area. The expertise and technical capabilities that we have developed will form the foundation for further work and funding applications. The introduction of Patent Boxes by several countries in a relatively short space of time has given rise to concerns that countries are engaging in tax competition for patent income. We find that if another European country were to introduce a Patent Box all countries could expect to see a reduction in tax revenues from patent income. We have successfully secured initial funding (from the International Tax Policy Forum) for Helen Miller to take this work forward. We will seek further funding to consider what the revenue maximising tax rates are for intellectual property in a context where governments strategically set a separate tax rate for patent income. |
| First Year Of Impact | 2011 |
| Sector | Communities and Social Services/Policy,Financial Services, and Management Consultancy,Government, Democracy and Justice |
| Impact Types | Societal,Economic,Policy & public services |
| Description | Corporate taxes and intellectual property : simulating the effect of patent boxes |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Policymakers/politicians |
| Results and Impact | Presented at the IFS workshop 'The taxation of intellectual property and patent boxes'. no information |
| Year(s) Of Engagement Activity | 2011 |
| URL | http://www.esrc.ac.uk/my-esrc/grants/RES-000-22-4268/outputs/read/ddbc8f35-e60f-4e87-b887-85b638a974... |
| Description | Corporate taxes and the location of intellectual property |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Other academic audiences (collaborators, peers etc.) |
| Results and Impact | The income derived from intellectual property is highly mobile; firms can and do locate patents separately from other aspects of their operations. We estimate the impact of corporate taxes on where European firms choose to hold intellectual property in the form of patents. We consider source and residence country taxes, and control for the potential non-tax benefits to the firm that arise through locating patents in different locations. no information |
| Year(s) Of Engagement Activity | 2011 |
| URL | http://www.esrc.ac.uk/my-esrc/grants/RES-000-22-4268/outputs/read/ae99a453-85d2-45f2-aa5a-d230bb718f... |
| Description | Globalisation, corporate taxes and the taxation of intellectual property |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Undergraduate students |
| Results and Impact | Lecture given to Cambridge undergraduates as part of a Public Economics Lecture series no information |
| Year(s) Of Engagement Activity | 2010 |
| URL | http://www.esrc.ac.uk/my-esrc/grants/RES-000-22-4268/outputs/read/5d702d01-d304-4f70-ac0d-b690cd72c3... |
| Description | Globalisation, corporate taxes and the taxation of intellectual property |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Undergraduate students |
| Results and Impact | Lecture to Oxford undergraduates as part of a Public Economics lecture series no information |
| Year(s) Of Engagement Activity | 2010 |
| URL | http://www.esrc.ac.uk/my-esrc/grants/RES-000-22-4268/outputs/read/8ae90278-8a4c-4e07-beb1-7a0f15b213... |
| Description | The location of intellectual property and corporate taxes |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Other academic audiences (collaborators, peers etc.) |
| Results and Impact | Presentation at an Institute for Fiscal Studies (IFS) internal seminar. |
| Year(s) Of Engagement Activity | 2010 |
| URL | http://www.ifs.org.uk/events/620 |