@article{c155a059827d40cf892db874bc909fdc,
title = "The Effect of Intellectual Property Boxes on Innovative Activity and Tax Benefits",
abstract = "We exploit a quasi-experimental setting with high internal validity to measure the effect of adopting an intellectual property (IP) box on innovative activity and tax benefits. We document innovative activity increases, including patent applications, grants, and highly skilled employment, at the expense of patent quality. Domestic firms drive this effect. We also provide evidence that firms with patents, on average, enjoy up to 7.0 percent lower effective tax rates, with the most significant tax benefits accruing to multinational firms compared to domestic firms. We use the Belgium IP box that limits tax benefits to patent income. Prior IP box literature analyzes heterogeneous IP boxes and provides evidence of substantial increases in patent applications in response to IP box adoption. Our results suggest the patent-income only IP box leads to a modest increase in innovative activity by a maximum of 5.1 percent, with multinationals benefitting relatively more from a financial perspective.",
keywords = "IP boxes, income shifting, tax avoidance, tax incentive",
author = "Tobias Bornemann and {Kelley Laplante}, {Stacie O.} and Benjamin Osswald",
note = "The data supporting this study{\textquoteright}s findings are publicly available from Bureau van Dijk Orbis, EPO PATSTAT, and the Belgian National Bank. We thank Sonja Olhoft Rego (editor) and two anonymous reviewers for their insightful comments and constructive feedback. This paper has also benefited from helpful comments by Harald Amberger, Kathleen Andries (discussant), Christof Beuselinck, Shannon Chen, Paul Demer{\'e}(discussant), Wim Eynatten, Michelle Hanlon, Martin Jacob, Dirk Kiesewetter (discussant), Pete Lisowsky, Dan Lynch, Jens Mu€ller (discussant), Wayne Nesbitt (discussant), Jochen Pierk, Silke Ruenger (discussant), James Stekelberg (discussant), David Samuel, Caren Sureth-Sloane, Cinthia Valle Ruiz, Jean-Philippe Van West, Mary Vernon, Brian Williams (discussant), Kaishu Wu (discussant), participants at the 2019 AAA Annual Meeting, the 2016 arqus Doctoral Workshop, the 2017 ATA Midyear Meeting, the 3rd Doctoral Research Seminar at WU Vienna University of Economics and Business, the DIBT Research Seminar, the 2017 40th Annual Congress of the European Accounting Association, the 2017 79th Annual Meeting of German Academic Association for Business Research, the 2017 7th Conference on Current Research in Taxation, the 2017 NTA 110th Annual Conference on Taxation, University of Illinois Tax Doctoral Consortium, the 2018 1st Hawaiian Accounting Research Conference, Colorado State University, New York University, Texas Christian University, University of Arkansas, University of Wisconsin–Madison, and WHU–Otto Beisheim School of Management Brown Bag Seminar. We are also grateful to Wim Eynatten for providing practical insights into the Belgian IP box. Tobias Bornemann and Benjamin Osswald gratefully acknowledge financial support by the Austrian Science Fund (FWF) Grant W1235-G16. Benjamin Osswald also appreciates the financial support from the Gies College of Business. Stacie O. Kelley Laplante gratefully acknowledges support from the James L. Henderson Chair and the Wisconsin School of Business.",
year = "2023",
month = sep,
day = "1",
doi = "10.2308/JATA-2021-013",
language = "English (US)",
volume = "45",
pages = "7--33",
journal = "Journal of the American Taxation Association",
issn = "0198-9073",
publisher = "American Accounting Association",
number = "2",
}