UK's 'Patent Box' tax concession slammed by think-tank as poorly targeted

In a presentation given at the launch of the 2010 Green Budget, the UK think-tank the Institute of Fiscal Studies slammed the government's attempts of a tax break for patent income - dubbed the 'patent box' - as an 'expensive and poorly targeted policy' that would only benefit a few large companies. This would reduce corporate tax on income from patents from 28% to 10%, estimated to be worth around £1.3 billion ($2.08 billion).

The patent box was announced by the Treasury last December, and was welcomed by the UK's drug sector, fronted by the Association of the British Pharmaceutical Industry, and also by drug giant GlaxoSmithKline, which announced investment plans in light of the tax concession (The Pharma Letters passim).

IFS presenters Rachel Grifith and Helen Miller noted that, while in theory, all firms which create income from patents will gain, in practice, just a few large firms hold the majority of patents, noting that, in 2005 of all the patents filed in the UK by UK-headquartered companies, just four - including GSK and AstraZeneca - accounted for a fifth of the total.