Tax Losses and Ex-Ante Offshore Transfer of Intellectual Property

Michael Stimmelmayr, Joel Slemrod, Rishi Sharma

Research output: Working paper / PreprintWorking paper

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Abstract

We develop a positive model of multinational firm behavior and analyze a firm's incentive to transfer an intellectual property (IP) right of uncertain value offshore ex ante, i.e. before its success or failure is realized. Our analysis highlights two major aspects of this decision. First, an asymmetric treatment of project gains and losses in the home country creates an incentive to transfer IP to a foreign low-tax country to avoid potentially negative profits at home. These incentives exist even when IP is priced at a fair arms-length price and are further strengthened in the presence of R&D tax incentives. Second, when multinationals have private information about the probability of project success, they have an incentive to transfer their most promising IP ex ante.
Original languageEnglish
Place of PublicationUnited States
PublisherNational Bureau of Economic Research
Number of pages44
DOIs
Publication statusPublished - 5 Jul 2023

Publication series

NameNBER Working Paper Series
PublisherNational Bureau of Economic Research
No.31452
ISSN (Print)0898-2937

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