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The patent box backlash begins

James Nurton

The US is the latest country to consider having a patent box. But Germany’s finance minister doesn’t like them.

The UK has just launched one; last week a bill to create one in the United States was introduced; and some say the best in the world is in Luxembourg. But now Germany’s finance minister wants an EU-wide ban on patent boxes.

SchaeubleWolfgang Schaeuble (right) reportedly commented this week that national laws offering tax incentives for investment in patents and other IP rights were discriminatory. Reuters quoted him as saying: “That’s no European spirit. You could get the idea they are doing it just to attract companies.” You might say: isn’t that just what countries have been doing with their corporate tax regimes for decades? Indeed, Germany itself offers various tax credits and other subsidies, which presumably Schaeuble does not think are “discriminatory”.

We’ve published several articles on patent boxes, including a comparison of the regimes in Hungary, Luxembourg, the Netherlands, Switzerland, the UK and Ireland as well as an analysis of a previous controversy over their fairness. The main impression I’ve formed from reading and hearing about them is that they are always remarkably complicated. Sadly that means that while governments normally promise they will benefit small and medium-sized companies, it’s actually the multinationals who can afford to employ an army of tax lawyers, accountants and economists who are most likely to benefit.

I doubt Schaeuble’s call for a ban on patent boxes will get anywhere: too many other EU states are committed to having them, and in any case taxation has been difficult to harmonise in Europe. But his comments are a reminder that not everyone supports special taxation for patents, and there may be good arguments against giving IP owners favourable treatment. With tax avoidance in general under scrutiny from national governments and the OECD, this will not be the last criticism of patent boxes that we hear.


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