Digitalization, IPRs and tax innovation

ABSTRACT

The emerging globalization policies are underlining the key importance of international and supranational regulations and standards. Digitalization has reframed the free circulation of intangible assets such as intellectual property rights (IPRs) on a global scale, technologically speeding up what the legal norms sometimes had not considered yet. Digitalization has dramatically helped to improve the linkage between production, distribution and their location, as virtual venues have also become virtual markets. Innovative digitalization and innovation and taxation policies are strongly interconnected. In this scenario, the emerging role of the EU as a connector not only among itself, but also with Canada, Japan and eventually Mercosur is a key piece of evidence that borders become weaker as long as digitalization evolves. It is clear that digitalization leads to a paradox for tax, business and wealth evolution system: the more digitalization, the more horizontalization of tax law and a speed up in verticalization from international to supranational can be seen. And this is the next turbulent challenge before us.

KEYWORDS:

• Digitalization
• intellectual property rights
• taxation
• patent boxes

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. The international regulation of this category of rights seems to be as old as the nineteenth century: The Paris Convention on the Protection of Industrial Property (1883), The Berne Convention for the Protection of Literary and Artistic Works (1886), and The Madrid Agreement Concerning the International Registration of Marks (1891), all set together under the administration of the Bureaux Internationaux Réunis pour la Protection de la Proprietè Intellectuelle (BIRPI) in 1893, currently under the administration of the World Intellectual Property Organization (WIPO) (Curtis, 2012, p. 7; Yu, 2016, p. 1).

2. According to the original TRIPS Agreement, Annex 1C of the Marrakesh Agreement (WTO, 1994): copyright and related rights; trademarks, geographical indications, industrial designs, patents, layout-designs (topographies) of integrated circuits, undisclosed information.

3. The WTO dispute settlement mechanism provides greater enforcement to trade rules agreed by member countries.

4. The concept of internal market of the EU is defined in art. 26 (2) of the TFEU.

5. For the panorama updated until 2016, of the invigorated IPR-related PTAs signed by the EU, the US and the EFTA, see Maskus & Ridley (2016, p. 33).

6. EurActive, 11 November 2016. Retrieved from: https://www.euractiv.com/section/trade-society/news/malmstrom-eu-us-trade-deal-frozen-after-trump-vote/

7. According to Technical Report (JTR, 2015), ‘the number of patent boxes in the EU has grown from 2 in 1995 to 11 in 2011, with a clear acceleration in recent years’. Sanz-Gómez (2015) reports that besides these regimes, EU ‘also Liechtenstein and the Swiss canton of Nidwalden have done so’. In the Progress Report on Preferential Regimes (OECD, 2017, p. 17) one can notice that the tax preferential regimes of active income of are not restricted to the European continent.

8. Base Erosion and Profit Shifting (BEPS) is a Project coordinated by the Organization for Economic Co-operation and Development (OECD), under the auspices of the G-20.

9. The Code of Conduct for business taxation was set out in the conclusions of the Council of Economics and Finance Ministers (ECOFIN) of 1 December 1997. It requires Member States to refrain from introducing harmful tax measures (legislative, regulatory and administrative) and amend any laws or practices that are deemed harmful, which have, or may have, a significant impact on the location of business in the Union. The fiscal State Aid Rules in the EU are set in the Articles 107–109, TFEU.

10. The countries that had stablished tax preferential regimes of IP incompatible to the nexus approach were as follows: Belgium, People's Republic of China, Colombia, France, Hungary, Israel, Italy, Luxembourg, Netherlands, Portugal, Spain (three regimes), Switzerland – Canton of Nidwalden, Turkey and United Kingdom. For a more comprehensive notion of the countries and regimes see OECD (2015, p. 63).

11. In February, 2018, The European Parliament's Economics and Monetary Committee approved plans for the ‘CCCTB’.

Additional information

Notes on contributors

Giovana Camila Portolese

Giovana C. Portolese is a Tax Analyst who works for the Secretariat of the Federal Revenue of Brazil. She also worked as an Assistant to the Mission of Brazil to the World Trade Organization – WTO and as a trainee in the European Commission Directorate-General for Taxation and Customs Union. Her research interests revolve around European and International Taxation, and International Trade. Giovana is CCO of the World Complexity Science Academy – WCSA and a board member of Brazilian scientific reviews. She holds a PhD degree in European Tax Law from the University of Bologna, Italy.

André Folloni

André Folloni is Juris Doctor at the Federal University of Paraná, Master of Laws at the Pontifical Catholic University of the State of Paraná, Professor and Coordinator of the Master and Doctoral in Law Program (PPGD) of PUCPR, and World Complexity Science Academy former vice president.