Coming Home to America: Dividend Repatriations by U.S. Multinationals
AbstractThis paper analyzes the financial flows from foreign subsidiaries of American multinational corporations to their parent corporations in the U.S. These repatriations are important not only to U.S. investors, who thereby have access to those funds, but also to the U.S. government, which generally does not tax foreign earnings of controlled foreign corporations until they are repatriated. The paper reviews the current tax system as applied to multinational firms, and considers the incentives it creates for various intra-firm financial transactions (in particular, the form of repatriations). These incentives appear to be inconsistent with historical repatriation patterns from aggregate time-series data on the overseas operations of U.S. multinationals. To resolve this inconsistency, we explore the determinants of distributions by foreign subsidiaries to their U.S. parent corporations, using new micro data on 12,041 controlled foreign corporations (and their 453 U.S. parents) collected from tax returns for 1984. This source exposes variations in distribution patterns not detectable in aggregate data. In particular, the data suggest that most subsidiaries paid no dividends to their parents in 1984, and that the U.S. government collected very little revenue on their foreign income while distorting their internal financial transactions.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2931.
Date of creation: Sep 1990
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Publication status: published as Taxation in the Global Economy, edited by Assaf Razin and Joel Slemrod, pp. 161-200. Chicago: The University of Chicago Press, 1990.
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- James R. Hines, Jr. & R. Glenn Hubbard, 1990. "Coming Home To America: Dividend Repatriations By U.S. Multinationals," NBER Chapters, in: Taxation in the Global Economy, pages 161-208 National Bureau of Economic Research, Inc.
- Hines, J.R.J. & Hubbard, R.G., 1989. "Coming Home To America - Devidend Repatriations By U.S. Multinationals," Papers 146, Princeton, Woodrow Wilson School - Public and International Affairs.
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