Tuesday, July 31, 2007

Tax patents?

Here is a worrying headline from the New Jersey newspaper NJ Biz, entitled "When Does It Make Sense To Patent Tax Strategies?"

Growing concern over a federal agency’s four-year-old decision to grant patents on tax strategies has some CPAs in New Jersey and elsewhere worried about counseling clients on tax planning.

But “if drugs can be patented, why not tax strategies?” asks E. Martin Davidoff, a Dayton CPA and tax attorney, referring to a decision by the U.S. Patent and Trademark Office to extend patent protection to tax strategies.


This is a terribly dangerous idea. Once again we turn to Richard Murphy, who points out why.

Suppose the government wants to outlaw a patented tax strategy. Does that mean they will have to pay compensation to the patent holder for loss of royalty income? In a society like the US that is on obvious risk. And in that case the right to legislate on tax has been privatised. That’s why not, Mr Davidoff.

Tax is a public good. The problem our profession has is that it sees it as a public bad. And that is undermining not just our profession, but the stability of our society as a whole.

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