Wednesday, 10 May 2017

A taxing issue: IP valuation, scrutiny, national taxation and global trade

Looking for a clue that might
lead to a good IP valuation ...
"Legal Issues: IP Asset Valuation and IRS Scrutiny" is a paper published in September of last year but posted to SSRN only last week by George H. Pike (Northwestern University Pritzker School of Law). "Legal Issues", a monthly column in Information Today, looks at legal concerns and challenges for the information industry in general; its ambit is not specifically tied to intellectual property.  

Pike's paper is short, weighing in at just three sides, but it touches on two well-known and highly sensitive issues: the valuation of intellectual property and the taxation of IP-based businesses that do not fit neatly within national borders but spill beyond them, generating profit on a global basis.  There is also a third issue, one that involves transparency and the ability of national tax authorities (in this case the United States) to obtain the level of information they require.  While no specific type of IP right is singled out, it is clear that the herd of elephants in the room is overwhelmingly comprised of patents -- those owned by Google, Facebook and Apple in particular.  

For the best part of the past decade, concern has been expressed that some of the world's most profitable companies have been carefully deploying their IP assets in their efforts to secure that their tax liability be incurred in jurisdictions where tax rates are low. They have however been doing so in a world in which questions have been posed as to the suitability of the existing regime of rules governing international taxation and the avoidance of double liability, where large profits are being made in places where no corresponding benefit through taxation is being enjoyed,

Pike's piece does not suggest that the businesses he names have committed any criminal acts under United States law; the worst-case scenario here appears to be one of making up for underpaid taxes. However, corporations like Google, Facebook and Apple must comply with tax laws in a wide variety of jurisdictions, from those that offer favourable tax rates as an incentive to invest, at one end of the scale, to those at the other extreme which see big business as an asset to be milked.  Issues involving IP rights, their ability to generate profit and the value placed on them will likely lie at the heart of the debate as to what sort of taxes their owners and users pay -- a debate that patent proprietors and other IP owners await with interest.

No comments:

Post a Comment