Roundtables can be carefully orchestrated or allowed to take their course, following the flow of participants' contribution to the discussion. This event was framed within a structure from which various issues were allowed to develop. This blogpost summarises the structure and offers an outline; a subsequent post will explore some of the topics under review in greater depth.
Dominic Robertson (a tax partner, Slaughter and May) opened by considering the legislative backdrop to IP taxation, focusing on four specific areas:
Paul Morton (head of group tax, RELX) then directed discussion as to what the proposed legislative changes mean for major corporates. Points raised included the following:
- How IP is actually valued;
- Appropriate tax treatment of the "patent box";
- Attempts by national governments to secure more revenue from some of the "low profit" IP-rich companies;
- What IP means for legal and tax purposes? (Here it seems that there is a big difference between the approaches taken by different tax authorities; it must also be remembered that the brand in itself is not "intellectual property" but, rather, a composite that is made up of a number of separately identifiable components.
Kelvin King (Senior Partner, Valuation Consulting) then focused on the challenge faced in valuing intangibles. This challenge is based upon the following observations:
- The guiding principle that tax should be attributed to the market where value is created (note to companies: do think carefully about where value is created);
- Manufacturing of products today is complex and global (supply chains are international and the number of teams individuals involved is huge);
- Value is not static (ie it may not be until later that the value of something is appreciated);
- Understanding where value lies is itself challenging (is it in the technology, the content, or a brand?);
- Determining how an asset is owned is may also be hard (technology platforms for example may be made up of different elements, held by a variety of entities);
- Timelines and roll out schedules may need to be factored in (ie if the product is rolled out over 10 years, how should the cost be reasonably allocated?)
A further post on this roundtable will follow in due course.
- Valuing IP is all about the ‘attitude of perspective: "value" means different things, depending on who you are (i.e. the buyer or seller)
- Regulation is going to make things more complicated and costly in the short term -- but in the long term it has the capacity to make the methodology of valuing more accurate.
- Attention should be paid to "combination assets" (ie branding, which is a combination of assets such as product content, registered IP rights and trade secrets).