Patent boxes and the erosion of trust in trade and in governance

Patent boxes spawned trust concerns in trade but also in governance given the migration of enterprises and of intellectual property assets only for tax reasons. The G-20 and the OECD reacted with soft law measures introducing the nexus to R&D (the proportional expenses related to it) as a standard to restore trust in governance (as requirement for governments issuing post-BEPS patent boxes and IP regimes) and substantial activities as a standard to restore trust in enterprises engaged in the IP trade. The new standards apply the rationale of input incentives to the back end of the innovation chain. The crucial question is whether the solutions found are appropriate and suitable to restore trust without hindering innovation and entrepreneurship. While dealing with such question, the work shows a number of shortcomings in regard IP regimes after BEPS Action 5 and how a narrow tax approach may lead to inefficiencies and frustration.