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Fiscal engineering and IPPs

Agenda item 6. Fiscal engineering and IPPs. Discussant comments. IPPs. Informa will create a new parent company listed in UK, incorporated in Jersey, and tax resident in Switzerland.

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Fiscal engineering and IPPs

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  1. Agenda item 6 Fiscal engineering and IPPs Discussant comments

  2. IPPs • Informa will create a new parent company listed in UK, incorporated in Jersey, and tax resident in Switzerland. • Under new tax rules, dividends from “real” activity will not be taxed. But income derived from intellectual property will be taxed • Companies that have a lot of intellectual property in their subsidiaries are being challenged – the revenues are in the Revenue’s view, largely artificial

  3. IPPs • Ocra company case study • Transfer patent to subsidiary in low tax country from which the patents are licensed to one or more licensing companies which do not levy a withholding tax on royalties paid abroad. • Spread between royalties paid and received can be minimised (no transfer pricing regulations)

  4. IPPs • Revenue is looking to clamp down on tax avoidance by multinationals that artificially offshore intellectual property assets to minimise tax liability • Selling back use of the intellectual property to domestic parent generates an offshore untaxed profit, and a generous tax deduction in the parent company country

  5. IPPs • Issue: international trade in IPPs has grown • SNA 2008 recognition of R&D as capital formation has led to increased need to measure IPPs • We need better classification system for IPPs, and in survey collection headings • We need information on affiliated company trade in IPPs and associated service payments

  6. IPPs • Background: classifications not up to speed, collection systems need to be developed. • International standards – OK • Measurement issues – huge • Tax avoidance schemes • R&D products not always patented • No one best current source of information (Frascatti?)

  7. IPPs • We need a new survey for international transactions in R&D products, especially between affiliates.

  8. IPPs • Summary • The form of the paper is a long way from what is needed to go in the manual • There needs more focus on fiscal engineering – if many (most) multinational minimise global tax burden by IPP switching schemes, there is no chance of the proposed survey getting useful answers

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