Читать книгу The IP Box Regime. A Study from an International and European Perspective - Elizabeth Gil García - Страница 5

IP Boxes also known as Patent Box regimes, are a topic of general interest for all tax jurisdictions, as far as they can be considered a good instrument in order to foster R&D and enhance competitiveness; but also from a negative side, they raise concerns related to harmful tax competition and unfair profit shifting in cross-border situations. If we could identify IP Box regimes with a single idea or word, that would be ‘controversial. In the era of the so-called ‘capitalism of intangibles’, this is due to the underlying goal of attracting high mobile capital, thus increasing the risk of tax competition and creating opportunities for aggressive tax planning strategies, especially in the case of multinational groups.

Moreover, there is an opinion that these regimes, as output tax incentives, can be unfair and discriminatory and when implemented together with input tax incentives, result in a disproportionate protection of R&D. In this respect, compared to input tax incentives which try to foster R&D activity applying tax reductions on the cost side, Patent Boxes apply on the profits arising from IP exploitation, creating a kind of ‘double reward’ effect, and this is precisely the controversial point and what makes these regimes look as the bad boy’ of the story. It seems then when dealing with Patent Boxes, both negative and positive aspects arise at the same time. This impression may be correct, because this is a kind of black and white topic, but this is precisely what makes it attractive and challenging. In this respect, the main challenge is how to design and implement these regimes in order to get a fair balance between the public interest consisting in the promotion of innovation and the fundamental Tax Law principles at the domestic, supranational (EU) and international level.

On the negative side, it has to be remarked that any tax incentive has a base erosion effect, and R&D tax incentives (both input and output) have this effect in the Corporate Tax revenue. Moreover, R&D tax incentives and especially Patent Boxes, may also have a profit shifting effect, due to the differences in the treatment of income from intangibles in different tax jurisdictions, whether they apply or not these regimes. In this respect, there are some well known examples of tax strategies consisting in the transfer of IP rights to companies located in tax jurisdictions which grant Patent Box regimes.

On the positive side, there are arguments in favour both from an economic and legal perspective. In the first case, even if tax incentives mean less revenue, in the long run the positive spillovers from R&D activities in terms of economic growth and competitiveness in a global market, would also lead to more tax revenue. From a legal perspective, protecting and fostering R&D may be a goal enhanced by specific constitutional grounds, either in itself or related to other public interests (such as protection of environment or health). In this case, this circumstance is what makes R&D tax incentives compatible with the relevant tax principles of ability to pay or equality, provided that other criteria, such as proportionality, will be respected.

In the case of IP Box regimes if, as already mentioned, the main challenge is to find a right balance between the negative and the positive aspects, that requires: on the economic side, to demonstrate the effective impact of this type of incentives in enhancing and improving R&D activities; on the legal side, to what extent the ‘double reward is proportionate. From this perspective, either to maintain or to abolish Patent Boxes may be legitimate tax policy decisions, but if the option is to save these regimes within some constraints aiming to reduce its main disadvantages, then the principle of legal certainty requires consistency in the design and implementation of the ‘new’ regimes, because the taxpayers undertaking R&D activities, which are generally developed in the medium and long term, need to perform these activities within a clear legal framework, and they have the right to expect a fair play in respect of the tax policy decisions that may affect their activity.

To some extent, we may consider that a kind of ‘fair play scenario’ was set up as a result of Action 5 of the OECD BEPS Action Plan dedicated to Preferential Tax Regimes. The implementation of this Action was mainly focused on IP Box regimes and the so-called ‘Modified Nexus Approach- (MNA) based on a substantial requirement, was the balance or meeting point between keeping fostering R&D and tackling aggressive tax planning.

From the very beginning and in order to preserve the new regimes compliant with the MNA requirement, consistency became a main concern. As far as we consider that compliance a safe harbour, the whole system must be coherent, preventing from the risk of counteracting those regimes by the cross effect of other measures aimed at tackling low taxation, irrespective of intentional or unintentional tax competition; an effect that would jeopardise the benefits of the incentive, thus creating legal uncertainty. Just to mention two well known examples: the need of consistency between compliant Patent Boxes and CFC rules and the permanent risk of conflict with EU State Aid rules.

In the case of Tax Treaties, the risk of low taxation comes from the Treaty provision itself, especially in those bilateral Conventions which follow the allocation rule for intangibles set up in article 12 of the OECD MC. The combined effect of this rule with a Patent Box regime applied in the residence State (the only one allowed to tax the IP income), will result in effective low taxation. At the Treaty level, this could be solved by a subject to tax clause, but even in this case the scope of the clause could be limited and the safe harbour still preserved, if the low taxation is due to a preferential tax regime that meets an economic substance requirement; this has been the solution adopted by the US MC (2016) in the case of royalties. A similar concern is reflected in the current discussion about the carve-outs related to the proposals included in Pillar Two of the OECD Work Plan. It seems that the risk of inconsistency will continue to be a never-ending story when dealing with the new IP Box regimes.

In any case, and whatever may be the approach to the Patent Box dilemma, a comprehensive and solid study of IP Box regimes is required. This is the outcome of this monography where the author, Dr. Elizabeth Gil, Tax Professor in the Universidad de Alicante, deals with the core topic as well as with related and relevant issues such as the concept of research, development and innovation. The author fixes the dogmatic root of these regimes in the theory of tax incentives, and includes the analysis of tax policy designs, legal constraints and potential conflicts, with special attention to the EU Law perspective. The result is a new and excellent contribution to her main field of research.

The dilemma will continue, but in these difficult times the wind may blow in favour of fostering research, and now not only for economic growth and competitiveness in the long run, but for more urgent reasons related to salvation and recovery.

María Teresa Soler Roch

February 2021