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Repatriation Taxes, Repatriation Strategies and Multinational Financial Policy

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  • Rosanne Altshuler
  • Harry Grubert

Abstract

Several investment-repatriation strategies are added to the standard model of a multinational in which an affiliate is located in a low-tax country and is limited to two alternatives: repatriating taxable dividends to the parent or investing in its own real operations. In our model, affiliates can invest in passive assets, which the parent can borrow against, or in related affiliates which can be used as vehicles for tax-favored repatriations. We show analytically how the availability of alternative strategies can effect real investment throughout the worldwide corporation. We use firm level data for U.S. multinationals to test for the importance of alternative strategies. The evidence is generally consistent with the theory, particularly the strategies using related affiliates.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8144.

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Date of creation: Mar 2001
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Publication status: published as Altshuler, Rosanne and Harry Grubert. "Repatriation Taxes, Repatriation Strategies And Multinational Financial Policy," Journal of Public Economics, 2003, v87(1,Jan), 73-107.
Handle: RePEc:nbr:nberwo:8144

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  1. Rosanne Altshuler & T. Scott Newlon & William Randolph, 1996. "Do Repatriation Taxes Matter? Evidence from the Tax Returns of U.S. Multinationals," Departmental Working Papers, Rutgers University, Department of Economics 199405, Rutgers University, Department of Economics.
  2. Grubert, Harry, 1998. "Taxes and the division of foreign operating income among royalties, interest, dividends and retained earnings," Journal of Public Economics, Elsevier, Elsevier, vol. 68(2), pages 269-290, May.
  3. Rosanne Altshuler & Paolo Fulghieri, 1996. "Dynamic Effects of Foreign Tax Credits on Multinational Corporations," Departmental Working Papers, Rutgers University, Department of Economics 199406, Rutgers University, Department of Economics.
  4. James R. Hines Jr., 1992. "Credit and Deferral as International Investment Incentives," NBER Working Papers, National Bureau of Economic Research, Inc 4191, National Bureau of Economic Research, Inc.
  5. repec:fth:coluec:611 is not listed on IDEAS
  6. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, American Economic Association, vol. 71(3), pages 393-410, June.
  7. Hans-Werner Sinn, 1990. "Taxation and the Birth of Foreign Subsidiaries," NBER Working Papers, National Bureau of Economic Research, Inc 3519, National Bureau of Economic Research, Inc.
  8. James R. Hines, Jr. & Eric M. Rice, 1990. "Fiscal Paradise: Foreign Tax Havens and American Business," NBER Working Papers, National Bureau of Economic Research, Inc 3477, National Bureau of Economic Research, Inc.
  9. Rosanne Altshuler & T. Scott Newlon, 1991. "The Effects of U.S. Tax Policy on the Income Repatriation Patterns of U.S. Multinational Corporations," NBER Working Papers, National Bureau of Economic Research, Inc 3925, National Bureau of Economic Research, Inc.
  10. Assaf Razin & Joel Slemrod, 1990. "Taxation in the Global Economy," NBER Books, National Bureau of Economic Research, Inc, National Bureau of Economic Research, Inc, number razi90-1.
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  13. Sinn, Hans-Werner, 1984. "Die Bedeutung des Accelerated Cost Recovery System fur den internationalen Kapitalverkehr. (The Significance of the Accelerated Cost Recovery System for International Capital Movements. With English s," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 37(4), pages 542-76.
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  15. 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.
  16. Leechor, Chad & Mintz, Jack, 1993. "On the taxation of multinational corporate investment when the deferral method is used by the capital exporting country," Journal of Public Economics, Elsevier, Elsevier, vol. 51(1), pages 75-96, May.
  17. Harry Grubert, 2000. "Tax Planning by Companies and Tax Competition by Governments: Is There Evidence of Changes in Behavior?," NBER Chapters, National Bureau of Economic Research, Inc, in: International Taxation and Multinational Activity, pages 113-142 National Bureau of Economic Research, Inc.
  18. Horst, Thomas, 1977. "American Taxation of Multinational Firms," American Economic Review, American Economic Association, American Economic Association, vol. 67(3), pages 376-89, June.
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  20. Mervyn A. King & Don Fullerton, 1983. "The Taxation of Income from Capital: A Comparative Study of the U.S., U.K., Sweden, and West Germany--The Theoretical Framework--," NBER Working Papers, National Bureau of Economic Research, Inc 1058, National Bureau of Economic Research, Inc.
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