Introducing an IP Licence Box in Switzerland: Quantifying the Effects

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. In response to the increasing international pressure on Switzerland to reform the ring-fenced elements in its tax system, the Swiss Government has put forward a comprehensive tax reform package. The proposal comprises, among other things, the introduction of a licence box, a substantial reduction in the cantonal profit tax rates and an allowance for excess corporate equity. We apply a computable general equilibrium model to quantify the economic effects of this reform. Our results reveal that the licence box, combined with the reduction in the cantonal profit tax, limits the outflow of the tax base of those companies that benefit from the current preferential tax treatment. The reduction in the cantonal profit tax and the fact that regularly taxed companies also benefit from the licence box render the reform package costly, such that the tax revenues will decline after the reform. Terms of use: Documents inJEL-Code: H250, H320, C680.

Tax Competition and IP Boxes after the Appliction of the Modified Nexus Approach

“…These results show that the license box dissuades companies from shifting profits outside of Switzerland. On the other hand, the researchers recognize only a partial effect of this IP box on output and on investments (Chatagny et al, 2015).…”

“…Other studies focus on a particular IP box within a certain country; Chatagny et al (2015) in Switzerland, Mohnen et al (2016) in the Netherlands as well as Bornemann et al (2018) in Belgium. Chatagny et al (2015) deal with the effects of the IP license box, which was part of Swiss tax reform. These results show that the license box dissuades companies from shifting profits outside of Switzerland.…”

Impact of the Intellectual Property Tax Regime on FDI in R&D Activities at the City Level

“…There are few studies available that investigate the impact of tax cuts on income generated by intangible assets. The majority of these studies use patent applications or other innovation activities as measures of outcome and find positive impact of the implementation of IP patent box (see Alstadsæter et al, ; Bradley et al, ; Chatagny, Koethenbuerger, & Stimmelmayr, ; Griffith et al, ; Mohnen et al, ). In contrast, Klodt and Lang () compare the R&D intensity and patent applications before and after the introduction of the patent/IP box reform for a selected group of European countries and conclude that the tax cuts do not lead to an increase in either the ratio of R&D expenditures to GDP or the number of patent applications.…”

Introducing an IP license box in Switzerland: quantifying the effects

“…8 SPCs account for 42 per cent of the overall corporate tax base and for 33 per cent of corporate tax in relative terms. 9 Uniformly lowering taxes is quite costly, suggesting that the nondiscriminatory tax provision of the OECD model tax convention that underlies the BEPS initiative puts a binding constraint on the ability to compete over taxes in smaller countries such as Switzerland, as well.…”

“…As such and contrary to the general insight that underlies many tax reform discussions, using residence-based capital taxes to engage in ercer tax competition might be undesirable from a national revenues. 9 At least in the short run, the overall budgetary eect of the reform turns out to be negative, even after increases in household capital taxes have been considered, c.f. Table 6.…”