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Evaluating the innovation box tax policy instrument in the Netherlands, 2007–13

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  • Pierre Mohnen
  • Arthur Vankan
  • Bart Verspagen

Abstract

Patent boxes are tax incentive schemes aimed at stimulating research and development (R&D) in firms by providing favourable tax rates to profits that can be linked to a specific immaterial asset, such as a patent. Because these profits are often hard to separate from other firm profits, patent boxes have been argued to be prone to tax shifting of firms, and tax competition between nations, as they might shift the location of the profits without affecting the location of R&D activities. Whether or not this occurs may also depend on conditions set in the patent box. We evaluate the innovation box policy instrument in the Netherlands, which is essentially a patent box, but without the formal requirement of a patent. We ask whether the innovation box has an effect on local R&D investment of the firm (‘additionality’), thereby putting the hypothesis of tax shifting to the test. We find that the innovation box indeed has a positive effect on R&D investment, but the average firm that uses the policy tends to use only a part of the tax advantage for extra R&D investment.

Suggested Citation

  • Pierre Mohnen & Arthur Vankan & Bart Verspagen, 2017. "Evaluating the innovation box tax policy instrument in the Netherlands, 2007–13," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 33(1), pages 141-156.
    • Handle: RePEc:oup:oxford:v:33:y:2017:i:1:p:141-156.
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    File URL: https://hdl.handle.net/10.1093/oxrep/grw038
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    Citations

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    Cited by:

    1. Dosi, Giovanni & Lamperti, Francesco & Mazzucato, Mariana & Napoletano, Mauro & Roventini, Andrea, 2023. "Mission-oriented policies and the “Entrepreneurial State” at work: An agent-based exploration," Journal of Economic Dynamics and Control, Elsevier, vol. 151(C).
    2. repec:spo:wpmain:info:hdl:2441/401t6job098n79ch91o9giov9d is not listed on IDEAS
    3. Ronald B. Davies & Dieter F. Kogler & Ryan Hynes, 2020. "Patent Boxes and the Success Rate of Applications," CESifo Working Paper Series 8375, CESifo.
    4. repec:hal:spmain:info:hdl:2441/401t6job098n79ch91o9giov9d is not listed on IDEAS
    5. Gaessler, Fabian & Hall, Bronwyn H. & Harhoff, Dietmar, 2021. "Should there be lower taxes on patent income?," Research Policy, Elsevier, vol. 50(1).
    6. Zhao, Chuanmin & Qu, Xi & Luo, Shougui, 2019. "Impact of the InnoCom program on corporate innovation performance in China: Evidence from Shanghai," Technological Forecasting and Social Change, Elsevier, vol. 146(C), pages 103-118.
    7. Schwab, Thomas & Todtenhaupt, Maximilian, 2021. "Thinking outside the box: The cross-border effect of tax cuts on R&D," Journal of Public Economics, Elsevier, vol. 204(C).
    8. Ciaramella, Laurie, 2023. "Taxation and the transfer of patents: Evidence from Europe," European Economic Review, Elsevier, vol. 151(C).
    9. Dai, Xiaoyong & Wang, Mengqi, 2024. "Unintended effects of tax incentives on firms’ strategic patenting," Journal of Economic Behavior & Organization, Elsevier, vol. 219(C), pages 1-24.
    10. Sabien Dobbelaere & Michael D. König & Andrin Spescha & Martin Wörter, 2023. "R&D Decisions and Productivity Growth: Evidence from Switzerland and the Netherlands," Tinbergen Institute Discussion Papers 23-080/VI, Tinbergen Institute.
    11. Dobbelaere, Sabien & König, Michael D. & Spescha, Andrin & Wörter, Martin, 2024. "R&D Decisions and Productivity Growth: Evidence from Switzerland and the Netherlands," IZA Discussion Papers 17026, Institute of Labor Economics (IZA).
    12. Iryna Rud & Mark Vancauteren & Hendrik W.H. Roekel & Michael Polder, 2023. "The Relationship Between R&D and Exports in Goods and Services of Firms in the Netherlands: An Empirical Analysis," Journal of Industry, Competition and Trade, Springer, vol. 23(3), pages 283-308, December.

    More about this item

    Keywords

    R&D policy; R&D tax incentives; patent boxes; tax shifting;
    All these keywords.

    JEL classification:

    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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