Foreign Taxes And The Growing Share Of U.S. Multinational Company Income Abroad: Profits, Not Sales, Are Being Globalized
AbstractThe foreign share of the worldwide income of U.S. multinational corporations (MNCs) has risen sharply in recent years. Data from a panel of 754 large MNCs indicate that the MNC foreign income share increased by 14 percentage points from 1996 to 2004. The differential between a company’s U.S. and foreign effective tax rates exerts a significant effect on the share of its income abroad, largely through changes in foreign and domestic profit margins rather than a shift in sales. U.S.-foreign tax differentials are estimated to have raised the foreign share of MNC worldwide income by about 12 percentage points by 2004. Lower foreign effective tax rates had no significant effect on a company’s domestic sales or on the growth of its worldwide pre-tax profits. Lower taxes on foreign income do not seem to promote "competitiveness."
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Bibliographic InfoArticle provided by National Tax Association in its journal National Tax Journal.
Volume (Year): 65 (2012)
Issue (Month): 2 (June)
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- Clausing, Kimberly A., 2009. "Multinational Firm Tax Avoidance and Tax Policy," National Tax Journal, National Tax Association, National Tax Association, vol. 62(4), pages 703-25, December.
- Harry Grubert & Rosanne Altshuler, 2013. "Fixing the System: An Analysis of Alternative Proposals for the Reform of International Tax," Departmental Working Papers, Rutgers University, Department of Economics 201305, Rutgers University, Department of Economics.
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