A COMPARATIVE ANALYSIS OF INCOME TAXATION ISSUES OF INTELLECTUAL PROPERTY FROM THE PERSPECTIVE OF DEVELOPED AND DEVELOPING COUNTRIES

Intellectual Property (IP) plays an important role in accelerating economic growth rates and consequently economic development, because of its affects on technology transfer and creation of other positive externalities. The role of IP in economic development is based on a number of factors involving taxation, specifically income taxation. The increasing volume of IP business transactions raises the issue of the capacity of income tax regimes in developed and developing countries to achieve two conflicting objectives: (I) protection of the tax base of IP transactions and (ii) encouragement of self development of IP. This paper makes a comparative analysis of the domestic Income tax treatment of IP business transactions from the perspectives of developed (Australia) and developing countries (Egypt and India). The analysis of the income tax treatment of IP transactions in these countries reveals that similar approaches are often employed by countries with regard to the protection of tax revenue from IP business transactions. However, all countries need to provide specific tax treatment with respect to the disposition proceeds of the IP transactions. On the other hand, different approaches are employed to encourage self development of IP which reflects the overall difference in tax policy. In this respect, Australia has an approach to encourage self development of IP which is similar to the majority of developed countries. However, it needs further improvement in terms of providing specific tax privileges to direct investments in R&D activities and exploitation of IP. The Indian income tax legislation is similar to the Australian for encouraging self developed IP. It is considered to be better than the Egyptian tax legislation and better than that in many developing countries. Accordingly tax legislation, particularly in developing countries, can play a significant role in stimulating self developed IP which leads to higher levels of economic growth and development.