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Tiffany Wang is anĚýIPilogueĚýWriter,ĚýIntellectual Property Journal Editor, and a 2L JD Candidate at Osgoode Hall Law School.Ěý

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Through accelerating digitalisation, the pandemic has vaulted taxation to the forefront of the global political and economic system. The Organisation for Economic Co-operation and Development (“OECD”) commenced public consultations in January to . The growth of multinational enterprises (“MNEs”), particularly digital corporations, enervates the current global corporate tax system, and the OECD opines that a (“GDP”). Two proposals, Pillar One and Pillar Two, seek to address this quagmire.

jurisdiction. (currently agreed at ). , . The endorsed package has .

Digitalisation pares back the integrity of tax structures. Tax avoidance runs rampant, and the two proposals attempt to outduel digital corporations’ approach of poaching taxes.

Presdent Biden’s leadership on pushing the two pillars through Congress and the G20 demonstrates a recycling of traditional taxation in dealing with Big Tech MNEs. Google, Amazon, Facebook, and Apple (“GAFA”) awaits trial as Washington envisions .

The lore of the minimum tax plan is “.” The global taxation reset presses for a pro rata basis of digital taxation to avoid base erosion. If Congress favors this plan, digital MNEs may fall prey to a .

Ambitious and focused, the OECD will ensure that all major players have some skin in the game of international taxation and digitalisation.

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Claire Wortsman is an IPilogue Writer and a 2L JD Candidate at Osgoode Hall Law School.

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In May 2021, of the Centre for Business Research at the Cambridge Judge Business School published a proposing the abolition of the UK’s £1.1 billion per year Patent Box scheme. The UK Patent Box’s so-called “costly failure” may serve as a valuable lesson for Canada.

ł§˛ą˛ő°ě˛ąłŮł¦łó±đ·É˛ą˛Ô’s offers eligible corporations a lower corporate tax rate of 6%. Quebec has an that reduces the corporate tax rate from 11.5% to 2% on patent royalties and up to 75% of profits from other specified forms of IP-related income, provided that the taxpayer has carried out research and development (R&D) in Quebec and that the IP being commercialized results, in whole or in part, from R&D carried out in Quebec. Over the years, there has been that other provinces may follow suit. There have even been for the federal government to adopt a comparable policy.

A Patent Box aims to encourage the commercialization of intellectual property within a nation’s borders. In the UK, eligible profits derived from intellectual property are taxed a . Large companies, especially those in the finance and insurance sectors, are the primary beneficiaries of this policy. According to Connell, there is no evidence that the Patent Box benefited the UK economy since it became fully operational in 2017.

By reducing corporate tax on profits derived from UK innovations, as well as spending an estimated £7.3 billion annually on R&D tax credits, the UK government hoped to fuel R&D within its borders. Instead, UK business spending on R&D conducted outside of the UK has roughly doubled since the introduction of its Patent Box. Connell proposes a policy mix to address the UK’s declining trade balance in business R&D funding. Among other policies, Connell suggests abolishing the Patent Box, restricting R&D tax credits to UK expenditure, restricting R&D claims to business enterprise expenditure on R&D (BERD), and taking steps to reduce fraud and error in R&D tax credit claims.

Two UK based companies, Solexa and Cambridge Silicon Radio (CSR), were acquired by San Diego based multinational corporations, and respectively. Connell used these acquired companies to demonstrate that the scale of the Patent Box and R&D tax credit subsidies is not always reflected in companies’ R&D footprint in the UK. Despite Illumina receiving $39.6m in Patent Box receipts in 2019 and Qualcomm Technologies International Ltd (QTI, CSR’s new name) receiving over $24m in combined Patent Box subsidies and R&D tax credits that same year, neither was required to commit significant additional commercialization activities as per the Patent Box policy objectives. Although Illumina Inc’s global R&D spending increased by 126% to $623m in five years, their R&D tax credit receipts reflecting their R&D operations based in the UK remained a modest $1.5m. Qualcomm’s R&D operations based in the UK were similarly modest, as QTI reduced their employee head count from 783 to 692 between 2015 and 2019, with 67 of those laid off involved in R&D.

In Connell’s ranking of total direct and indirect tax support for R&D as a percentage of GDP by country, Canada ranks 8^th at just over 0.2% after France, Russia, the UK, South Korea, Austria, Belgium, and Italy, but ahead of the U.S., OECD, Netherlands, EU, Ireland, Japan, Czech Republic, and China. Canada and Japan appear to be the only countries with subnational tax support for BERD. Connell’s report demonstrates that the magnitude of tax support for R&D does not necessarily determine a country’s R&D footprint, yet it can be tailored properly to encourage growth.

Quebec’s IP box is the first of its kind in North America. Although Quebec has had a Patent Box since 2016, its 2020-2021 announced a shift from the Deduction for Innovative Manufacturing Corporations (DIMC) to the Incentive Deduction for the Commercialization of Innovations (IDCI). Perhaps Quebec’s newly evolved Patent Box will foster R&D within Quebec and stand in contrast to the UK’s failure. Or perhaps it will similarly fail to generate results. Either way, it will likely have important consequences for future Canadian IP taxation policies, at both the provincial and federal levels. Ěý

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On Monday February 3, 2020, Professor Abbott, a prominent voice at the intersection between law and technology, joined the IP Osgoode community in his talk: . He discussed recent advancements in technology, such as Alphabet’s DeepMind AI , and how the law should rethink human and robot relationships as AI becomes more useful.

His answer is AI legal neutrality. The argument is simple on its face: the law should not discriminate between behaviour by AI and by humans. While they should not be treated identically, Abbott suggests that through tax, tort, and intellectual property law, it could be beneficial to create a similar standard for assessing AI and human behaviour. This article will explore the economic and tax arguments.

Most tax revenue comes from income taxes and payroll taxes – in fact payroll taxes . So, it is contrary to the government’s interest to incentivize replacing human workers with new technology. Widespread unemployment means a widespread reduction in tax revenue. The concept of AI legal neutrality in the tax realm would mean that humans do not pay taxes. Then, increasing corporate taxes fills the gap in revenue. Professor Abbott suggests that this can level the playing field between people and machines.

have argued for a tax on robots in order to slow down the adoption of AI, which is fuelling automation. add that businesses adopt AI not because it is more productive, but because the tax code urges them to – that is, they will save money on taxes by eliminating human workers. South Korea, , implemented a in 2017—an act one can liken to the first instance of taxing robots, albeit indirectly.

My own view is that rather than taxing businesses outright for using automation, perhaps implementing some other corporate strategies would put humans and robots on a more equal playing field. South Korea did this by starting a “” initiative, where low-skilled workers develop skills to handle robots and automated machines. is one organization that advocates for taxing capital over labour. While there is an obvious benefit to this when it comes to one of their main causes, which is taxing natural resources and pollution, it is more difficult to justify taxing a resource that would lead to a decrease in innovation. Innovation is not all about productivity, but also has implications for social good, such as finding solutions for health issues, pollution, and drawing important insights from data. I believe there is a risk to stifling innovation just for the sake of preserving human employment. For human contribution to be relevant, it is necessary to learn more about the technology, like AI, which is leading to new discoveries. In this way, humans can work with technology to augment it, rather than act as an obstacle to its progress.

Written by Summer Lewis, a second year JD Candidate at Osgoode Hall Law School. Summer is also the Content Editor of the IPilogue.

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If , the program would require all 12 of the US federal-science agencies (totalling approximately $60 billion in research) to adopt this policy of depositing articles, though no specific timeframe within which to do so has been proposed.Ěý This movement may have more credibility than a movement advocating for access solely on the basis of fair use.Ěý Access2Research`s position is more than the fact that copyright law can be circumvented by a purpose of research or scholarship under section 107 of US .Ěý Their position is also based on the fact that the US tax-payer has funded this research and is thus entitled to access the results. ĚýThis is a unique argument for access that may be supported with an analogous situation already present in US copyright law.

Although the copyright implications of funding research aren`t specifically addressed in US , there is an analogous situation between funded research and works made for hire.Ěý states that “In the case of a work made for hire, the employer or other person for whom the work was prepared is considered the author for purposes of this title...”.Ěý While funding research is certainly not an identical situation to employing someone to create a work, it does have a practical similarity in that the work would not have been created aside from the support of a contributing party.Ěý In a work for hire scenario, an employer tasks the author with creating a work, and the author is compensated not with economic rights to the work but with whatever wage the employer has offered to pay them.Ěý Thus the employer is compensated, in the case of a work made for hire, for their involvement in the creation of the work.Ěý In the same way, a researcher wants to conduct research and publish a paper, but needs third party financial contributions in order to complete the work.Ěý Is it fair to ask the person whose contribution paid for the creation of a work to pay a second time to have access to that work?Ěý

In US law the employer, who has already compensated the author for creating a work, owns the copyright in the work and has full access to it.Ěý While the analogy between employing someone and funding research is not perfect, there is a sense of fairness in the idea that someone who financially supports the creation of a work should have access to that work. ĚýBesides justifying the policy on the basis of legal consistency, the fact that the NIH has already implemented this policy with success, suggests that the policy is sound.

companies have naturally opposed this policy by stating that implementing the NIH system with all research funded through federal-science agencies would make that system unworkable. Ěý, a spokeswoman for the Association of American Publishers states that publishers are working to advance the public access issue, but that implementing the NIH system as a one-size-fits-all for federally funded research would be a mistake.

What we can say is that this policy has already been adopted into a large tax funded research agency (NIH) and the policy is consistent with underlying theory of ownership in American copyright law.Ěý While implementing free access for all federally funded research will no doubt require some minor adjustments for each field of research, the White House should recognize this policy as both fair and viable and therefore worth considering.

Adam Stevenson is a JD candidate at Western University

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