Tax Breaks for the Promotion of Transfer of Technology under Article 66:2 of the TRIPS Agreement

Abstract
This doctoral project explores the current problems and deficiencies relating to transfer of technology and is based on an extensive review of the literature in this field. In this context, the project seeks to explore the potential of tax reductions as a means to foster transfer of technology by the private sector. The key question is whether the present framework supports the implementation of Article 66:2 TRIPS or whether this is impeded.

Under Article 66.2 TRIPS, developed WTO Members are required to encourage technology transfer to least developed countries. In practice, developed WTO Members have found it difficult to honour this commitment, as technology remains in the hands of the private sector. Yet, increasing the flow of technology towards least developed countries was a part of a deal, which developed WTO members struck with least developed countries in the context of the Uruguay Round of multilateral trade negotiations.

Thus, new tools for promotion of technology transfer need to be found and tax breaks for knowledge transfer might offer an effective tool to encourage knowledge transfer from North to South. The current problem is that the tax breaks for technology transfer qualify as export subsidies under the WTO subsidies regime and therefore are prohibited under the WTO Subsidies and Countervailing Measures Agreement. Nevertheless, multinational corporations’ objectives are driven by business development and instruments to increase their own financial profits. Thus it is believed that tax breaks that refund a significant percentage of corporations’ spending on research and development activities and transfer of technology could be the best suited instrument to encourage technology transfer from the private sector and to achieve better compliance of developed countries with article 66:2 of the TRIPS Agreement.