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SSRN Electronic Journal
Article . 2014 . Peer-reviewed
Data sources: Crossref
EconStor
Research . 2014
Data sources: EconStor
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Effective Tax Rates Under IP Tax Planning

Authors: Evers, Lisa; Spengel, Christoph;

Effective Tax Rates Under IP Tax Planning

Abstract

Tax planning with intangibles has become one of the most popular and most vividly debated topics in international taxation. We incorporate various intellectual property (IP) tax planning models into forward-looking measures of effective tax rates, namely the disposal of intangibles to low-tax subsidiaries, intra-group licensing arrangements, and intra-group contract R&D. In doing so, we draw upon the methodology put forward by Devereux and Griffith and amend this model by considering a research & development (R&D) investment which is carried out by a parent company, whereby the resulting intangible is exploited by a foreign subsidiary. We point out analytically under which conditions IP tax planning achieves the objective of reducing the effective average tax rate of the group. We find that the disposal of intangibles to low-tax subsidiaries does not achieve this tax planning objective, if the true value of the asset is subject to tax upon the disposal. We show to what extent the parent must understate the value of the intangible in order to reduce the group’s tax burden. We furthermore point out that contract R&D may generally achieve a significant lower effective tax burden. We present cost of capital and effect average tax rates to illustrate these findings.

Country
Germany
Keywords

intangible assets, transfer pricing, corporate taxation,effective tax rate,tax planning,profit shifting,transfer pricing,intellectual property,intangible assets,contract R&D, 330, ddc:330, H25, K34, effective tax rate, intellectual property, profit shifting, contract R&D, F23, H32, H87, tax planning, corporate taxation, jel: jel:F23, jel: jel:H32, jel: jel:H87, jel: jel:K34, jel: jel:H25

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
5
Average
Average
Average
Green
bronze