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Research Papers

Reining in Intellectual Property Tax Avoidance

October 10, 2017
Computer and glasses picture from Aliis Sinisalu via Unsplash.

A new research paper from Professor Linda Beale of Wayne State University looks at the need to change the tax treatment of intellectual property in order to curb tax avoidance.  

Here is the abstract:

“Although many politicians suggest that the primary purpose of any tax reform should be cutting taxes and achieving simplicity, the main problems of our tax system do not stem from either lack of simplicity or over-taxation. They have to do with provisions that have outlived their purpose, such as the various permanent subsidies in the tax code for fossil fuels, in an era of extraordinary climate change, and the privileged rate for capital gains, in an era of increasing inequality from tax loopholes and subsidies available to the wealthy.

Much of the treatment of intellectual property (IP) requires updating, and this article evaluates the suggestions of a number of key academic and practitioner commentators that appeared in law review articles over the last year, looking at proposals for a new capitalization scheme, taxation of virtual economies, rethinking corporate restructurings, and ways to achieve innovation without permitting the kind of IP profit shifting that has driven offshoring of profits.

One of the primary areas in which the tax code needs updating is transfer pricing — a system that harks back to a world before intangibles, in the form of easily relocatable IP, became the bones of the knowledge economy. Scholars clearly recognize that the substantial presence of IP in globalized commercial enterprises requires better rationales for tax expenditures and improved understanding of the areas in which current provisions fail to accomplish their objectives.”

More: Beale, Linda M., “Reining in Intellectual Property Tax Avoidance” (June 26, 2017). 155 Tax Notes 1877 (June 26, 2017); Wayne State University Law School Research Paper No. 2016-37.

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