The appropriate tax treatment of intellectual property rights in developing countries: reference to pharmaceutical industry in Egypt and India

Abstract

Strengthening the protection measures of Intellectual Property Rights (IPR) in compliance with the TRIPS agreement creates a need for an appropriate tax treatment of IPR by developing countries. This need is important to stimulate locally developed IPR and protect the tax revenue arising from IPR transactions. This thesis examines the tax treatment of IPR in Egypt and India. Accordingly, the thesis employs a mixed research methodology approach consisting of legal reasoning and economic analysis The thesis demonstrates that there are significant differences in the tax policy and legislation relating to IPR in Egypt and India. In particular, the pharmaceutical industry is disadvantaged compared with other industries in Egypt. By contrast, the Indian pharmaceutical industry is given a preferential tax treatment when compared with over other industries in terms of taxation. However, the tax burden on the pharmaceutical industry is approximately equivalent in both countries. Nevertheless, the use of the B-index indicator for tax competitiveness in terms of taxing IPR shows that India is more competitive compared with Egypt. The thesis identifies the role of withholding tax and transfer pricing measures in protecting the tax base related to IPR. These work as integrity measures which reinforce the role of tax incentives to stimulate locally developed IPR. India has a comprehensive definition of royalty within ITA1961 and stable international tax policy which reflected in its tax treaties with other countries. By contrast, Egypt has a narrow definition of royalty within ITL2005 and it does not set a definite international tax policy. In relation to transfer pricing measures relating to IPR, neither Egypt nor India has specific measures to deal with IPR licensing and cost sharing arrangements. India has specific measures for managing tax incentives for the development of IPR. Moreover, India has paid attention to exchange of information while Egypt does not has specific administrative measures for exchange of ...