The key reason to implement an IP Box is to stem the outflow of IP profits to low-tax jurisdictions. [...] This option is particularly attractive now given the general acceptance that preferential tax treatment of IP income must be linked to real activity in the implementing jurisdiction and because of the agreement on a global minimum corporate tax rate. [...] If so, and if more than 60 percent of IP profits generated in Canada are being taxed in other countries, the overall net fiscal cost of an IP Box would be zero. [...] If implemented as a tax credit, the federal government would bear the entire cost of the program while provincial governments would receive a windfall tax revenue gain from the reduced outflow of IP profits. [...] Extending the tax preference to existing IP could be a sensible approach if IP profits booked in Canada are substantially smaller than profits shifted to other jurisdictions.
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