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Welcome Home to Japan: Repatriation of Foreign Profits by Japanese Multinationals

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  • Tajika, Eiji
  • Nakatani, Ryota
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    Abstract

    The empirical literature suggests that repatriation decisions of U.S. multinational corporations are influenced by taxes. Although the U.S. and Japan adopt the same foreign tax credit system, we have found no evidence that corporate taxes have significantly affected dividend repatriation of Japanese multinationals. Instead, we have found that almost half of Japanese foreign affiliates pay dividends and their average marginal dividend payout rate is about twenty percent. The results also suggest that the repatriation behavior varies across industries and countries. Furthermore, parent companies' financial status is found to influence the profit remittance of their foreign affiliates.

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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/16994/1/070econDP08-04.pdf
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    Bibliographic Info

    Paper provided by Graduate School of Economics, Hitotsubashi University in its series Discussion Papers with number 2008-04.

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    Length: 32 p.
    Date of creation: Mar 2008
    Date of revision:
    Handle: RePEc:hit:econdp:2008-04

    Note: March 31, 2008
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    Web page: http://www.econ.hit-u.ac.jp/
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    Keywords: Japanese multinationals; repatriation; foreign tax credits;

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    1. Desai, Mihir A. & Foley, C. Fritz & Hines, James R. Jr., 2001. "Repatriation Taxes and Dividend Distortions," National Tax Journal, National Tax Association, vol. 54(n. 4), pages 829-51, December.
    2. Rosanne Altshuler & T. Scott Newlon & Joel Slemrod, 1993. "The Effects of U.S. Tax Policy on the Income Repatriation Patterns of U. S . Multinational Corporations," NBER Chapters, National Bureau of Economic Research, Inc, in: Studies in International Taxation, pages 77-116 National Bureau of Economic Research, Inc.
    3. Rosanne Altshuler & Harry Grubert, 2002. "Where will they go if we go territorial? Dividend exemption and the location decisions of U.S. multinational corporations," Departmental Working Papers, Rutgers University, Department of Economics 200201, Rutgers University, Department of Economics.
    4. Peter J. Mullins, 2006. "Moving to Territoriality? Implications for the United States and the Rest of the World," IMF Working Papers, International Monetary Fund 06/161, International Monetary Fund.
    5. Rosanne Altshuler & Harry Grubert, 2002. "Repatriation Taxes, Repatriation Strategies and Multinational Financial Policy," Departmental Working Papers, Rutgers University, Department of Economics 200009, Rutgers University, Department of Economics.
    6. Hines, J.R.J. & Hubbard, R.G., 1989. "Coming Home To America - Devidend Repatriations By U.S. Multinationals," Papers, Princeton, Woodrow Wilson School - Public and International Affairs 146, Princeton, Woodrow Wilson School - Public and International Affairs.
    7. Brandon Julio & David L. Ikenberry, 2004. "Reappearing Dividends," Journal of Applied Corporate Finance, Morgan Stanley, Morgan Stanley, vol. 16(4), pages 89-100.
    8. Alan J. Auerbach & Michael P. Devereux & Helen Simpson, 2008. "Taxing Corporate Income," NBER Working Papers 14494, National Bureau of Economic Research, Inc.
    9. C. Fritz Foley & Jay C. Hartzell & Sheridan Titman & Garry Twite, 2006. "Why do firms hold so much cash? A tax-based explanation," NBER Working Papers 12649, National Bureau of Economic Research, Inc.
    10. Desai, Mihir A. & Hines, James R. Jr., 2004. "Old Rules and New Realities: Corporate Tax Policy in a Global Setting," National Tax Journal, National Tax Association, vol. 57(4), pages 937-60, December.
    11. Desai, Mihir A. & Hines, James R. Jr., 2003. "Evaluating International Tax Reform," National Tax Journal, National Tax Association, vol. 56(3), pages 487-502, September.
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