Spillover from the Haven: Cross-border Externalities of Patent Box Regimes within Multinational Firms

Thomas Schwab, Maximilian Todtenhaupt

Publication: Working/Discussion PaperWU Working Paper

Abstract

We analyze the cross-border effect of tax cuts on R&D activity in the context of profit shifting. A tax cut in one location of a multinational enterprise reduces the user cost of capital for the whole group if profit shifting is possible and exerts a positive cross-border effect on R&D output. Using micro-level data, we find an increase of patent output of 15% upon the implementation of a foreign tax cut for firms with cross-border links. In addition, we find that foreign tax cuts prohibiting profit shifting generate a negative cross-border effect on average patent quality.
Original languageEnglish
Place of PublicationVienna
PublisherWU Vienna University of Economics and Business
Publication statusPublished - 1 Mar 2018

Publication series

NameWU International Taxation Research Paper Series
No.2016-07

WU Working Paper Series

  • WU International Taxation Research Paper Series

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