I have written about patent box schemes before (incidentally, the name comes from the box provided on tax forms for companies to claim the benefit). Such programs, which provide reduced tax rates (typically between 5% and 15%) on income attributable to patented IP, have been introduced in a number of countries, including the UK, the Netherlands, Belgium, France, Ireland, Spain, Luxembourg, Switzerland and China.
In the United States the Manufacturing Innovation in America Act of 2013 (HR 2605), which would provide for a patent box tax reduction, was introduced in the House of Representatives on 28 June 2013, and is currently before a congressional committee. (I note, however, that GovTrack.us gives the legislation only a 1% chance of getting past committee, and a 0% chance of being enacted!)
Potential patent box rules will be proposed by AusBiotech and the Export Council of Australia, and will considered as part of a planned government review of research and development later this year.
I am pleased to see that a review that includes consideration of a patent box scheme will be going ahead, and I am hopeful that it will report favourably on the proposal. I am in favour of a patent box tax reduction in Australia for two reasons:
- I believe that it provides the right incentive for commercial innovation, by rewarding not only investment in R&D (as existing grant and tax relief programs do), but more specifically R&D which results in protectable intellectual property which is then actually protected and successfully commercialised; and
- with a number of other developed economies providing patent box tax incentives, Australia places itself at a competitive disadvantage as a location for conducting research, development and manufacturing if it does not do likewise.