1. Fiscal engineering and IPPs Discussant comments Agenda item 6

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