259 Global Project: The need for a pro-business taxation policy : Patent Box

글 | 김승열 기자 2021-10-02 / 15:06

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In the era of the 4th industrial revolution, driverless cars, and artificial intelligence, vitalization of the intellectual property industry or national support is the most urgent task. Government-wide support such as tax benefits for R&D is substantial, but tax policies in the monetization or commercialization stage of intellectual property are surprisingly insufficient. In that regard, the patent box has a great implications for us.


First, let's look at the patent box, which is one of the tax policies to promote the use of intellectual property. The reason the term 'box' is used in an odd way is derived from the box indicating a low tax rate in the checkbox of a tax return. In other words, it refers to an incentive-type tax policy that reduces corporate tax on profits generated from the commercialization of intellectual property including patents.

It was first introduced in Ireland in 1973. Ireland, which is relatively poor compared to Europe, has used a low corporate tax policy to attract world-class multinational corporations. As a result, it succeeded in attracting global companies such as Google and Apple, and achieved high economic growth.

However, the irony is that Irish patent boxes had a great impact on tax policies in other countries, such as Europe and China (a system that reduces corporate tax rates for Chinese registered patents by introducing a new corporate income tax law), but Ireland It is the fact that the patent box was abolished after experiencing a crisis.


The need for a pro-business taxation policy


The Intellectual Property Commission of Korea has been having an in-depth discussion about the introduction of the patent box.

There are objections that the patent box is an addition to the existing special tax policy, so there are issues such as equity or reduction in tax revenue. There is also a high risk of tax evasion due to the illegal inflow of intellectual property into accounting accounts. However, compared to Ireland or the UK, the introduction of patent boxes did not lead to a decrease in tax revenue. Ireland's attempts to promote economic growth through bold tax policies such as tax havens need to be actively referred to. If side effects occur after implementation, wouldn't it be better to come up with a systematic supplementary measure through strict law enforcement?


In addition, if the patent box system is expanded to foreign companies within a limited scope, it is expected to greatly contribute to attracting foreign companies to Korea.  It is necessary to reorganize administrative services and, in particular, to reorganize taxation policies to be more business-friendly. We expect government-wide support and efforts to reduce corporate tax related to the intellectual property industry from a long-term perspective rather than to secure short-term tax revenue.

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