Foreign Income and Domestic Deductions
AbstractTo what extent should taxpayers deduct expenses incurred domestically that contribute to foreign income production? It is widely believed that if the home country does not tax foreign income, then it also should not permit deductions for that portion of domestic expenses attributable to earning foreign income. This prescription is, however, inconsistent with the decision to exempt foreign income from taxation in the first place. The paper shows that, for any system of taxing foreign income, the consistent and efficient treatment is to permit domestic expense deductions for all expenses incurred domestically. This differs from the current U.S. regime, under which American firms were required to allocate more than $110 billion of domestic expenses against foreign income in 2004.
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Bibliographic InfoArticle provided by National Tax Association in its journal National Tax Journal.
Volume (Year): 61 (2008)
Issue (Month): 3 (September Citation: 61 National Tax Journal 461-75 (September 2008))
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- Johannes Becker, 2009.
"Taxation of Foreign Profits with Heterogeneous Multinational Firms,"
CESifo Working Paper Series
2899, CESifo Group Munich.
- Johannes Becker, 2013. "Taxation of Foreign Profits with Heterogeneous Multinational Firms," The World Economy, Wiley Blackwell, vol. 36(1), pages 76-92, 01.
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