About the indicator

When a country offers multinational corporations special tax incentives for intellectual property, such as patents, the intended goal of stimulating innovation can often be thwarted. These incentives are often abused to shift profit and underpay tax elsewhere, without leading to significant innovation. Countries can often follow suit in offering these "patent box regimes", sparking a race to the bottom. This indicator measures if the country offers corporations preferential tax treatment for income related to intellectual property rights (eg patent boxes). It also considers whether the country applies the OECD's (Organisation for Economic Co-operation and Development) test of genuine nexus between the income generated and the underlying innovation that led to that income.