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Recent Developments in the Debate on Deferral

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  • Rosanne Altshuler

    ()
    (Rutgers University, Department of Economics)

Abstract

In this paper, I attempt to bring the debate over deferral up to date. The paper is divided into three sections. The first starts with a review of traditional models of international tax systems to provide a basic understanding of the efficiency consequences of deferral. This section then proceeds to evaluate some of the theoretical arguments for deferral that have appeared in the most recent economic literature. The second section provides a brief overview of current U.S. tax policy toward foreign source income. This review provides the background necessary to evaluate results from the empirical economic literature on the impact of taxes on multinational firms. The third section explores how firms' economic behavior is affected by the availability of deferral on active profits. Understanding the behavioral responses of firms to home and host country taxation is necessary to evaluate the efficiency and revenue aspects of changes to the current deferral regime. As in the first section, the focus is on the most recent evidence available in the economic literature.

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Bibliographic Info

Paper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number 200013.

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Date of creation: 25 Jul 2000
Date of revision:
Handle: RePEc:rut:rutres:200013

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Related research

Keywords: deferral ; international taxation; multinationals; tax reform;

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References

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  1. Devereux, Michael P & Hubbard, R Glenn, 2003. "Taxing Multinationals," International Tax and Public Finance, Springer, vol. 10(4), pages 469-87, August.
  2. Rosanne Altshuler & T. Scott Newlon & William Randolph, 1996. "Do Repatriation Taxes Matter? Evidence from the Tax Returns of U.S. Multinationals," Departmental Working Papers 199405, Rutgers University, Department of Economics.
  3. Altshuler, R. & Newlon, T.S., 1991. "The Effects of US Tax Policy on the Income Repatriation Patterns of US Multinational Corporations," Discussion Papers 1991_60, Columbia University, Department of Economics.
  4. Alfons Weichenrieder, 1996. "Anti-tax-avoidance provisions and the size of foreign direct investment," International Tax and Public Finance, Springer, vol. 3(1), pages 67-81, January.
  5. Hans-Werner Sinn, 1990. "Taxation and the Birth of Foreign Subsidiaries," NBER Working Papers 3519, National Bureau of Economic Research, Inc.
  6. Hugh J. Ault & David F. Bradford, 1990. "Taxing International Income: An Analysis of the U.S. System and Its Economic Premises," NBER Chapters, in: Taxation in the Global Economy, pages 11-52 National Bureau of Economic Research, Inc.
  7. James R. Hines Jr., 1991. "Dividends and Profits: Some Unsubtle Foreign Influences," NBER Working Papers 3730, National Bureau of Economic Research, Inc.
  8. Hines, James Jr., 1994. "Credit and deferral as international investment incentives," Journal of Public Economics, Elsevier, vol. 55(2), pages 323-347, October.
  9. Grubert, Harry & Mutti, John, 1991. "Taxes, Tariffs and Transfer Pricing in Multinational Corporate Decision Making," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 285-93, May.
  10. repec:fth:coluec:478 is not listed on IDEAS
  11. Auerbach, Alan J, 1979. "Wealth Maximization and the Cost of Capital," The Quarterly Journal of Economics, MIT Press, vol. 93(3), pages 433-46, August.
  12. Hartman, David G., 1985. "Tax policy and foreign direct investment," Journal of Public Economics, Elsevier, vol. 26(1), pages 107-121, February.
  13. Keen, Michael & Piekkola, Hannu, 1997. " Simple Rules for the Optimal Taxation of International Capital Income," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(3), pages 447-61, September.
  14. Horst, Thomas, 1980. "A Note on the Optimal Taxation of International Investment Income," The Quarterly Journal of Economics, MIT Press, vol. 94(4), pages 793-98, June.
  15. Joel Slemrod, 1989. "Optimal Taxation and Optimal Tax Systems," NBER Working Papers 3038, National Bureau of Economic Research, Inc.
  16. Assaf Razin & Joel Slemrod, 1990. "Taxation in the Global Economy," NBER Books, National Bureau of Economic Research, Inc, number razi90-1, May.
  17. David F. Bradford, 1979. "The Incidence and Allocation Effects of a Tax on Corporate Distributions," NBER Working Papers 0349, National Bureau of Economic Research, Inc.
  18. James R. Hines, Jr. & Eric M. Rice, 1990. "Fiscal Paradise: Foreign Tax Havens and American Business," NBER Working Papers 3477, National Bureau of Economic Research, Inc.
  19. Michael Keen & David E. Wildasin, 2001. "Pareto Efficiency in International Taxation," Public Economics 0112003, EconWPA.
  20. Jason G. Cummins & R. Glenn Hubbard, 1994. "The Tax Sensitivity of Foreign Direct Investment: Evidence from Firm-Level Panel Data," NBER Working Papers 4703, National Bureau of Economic Research, Inc.
  21. Rosanne Altshuler & Harry Grubert, 1996. "Balance Sheets, Multinational Financial Policy, and the Cost of Capital at Home and Abroad," NBER Working Papers 5810, National Bureau of Economic Research, Inc.
  22. Goodspeed, T-J & White, A-D, 1996. "International taxation," Papers 96-11, Wellesley College - Department of Economics.
  23. Altshuler, R. & Fulghieri, P., 1990. "Incentive Effects Of Foreign Tax Credits On Multinationals," Discussion Papers 1990_11, Columbia University, Department of Economics.
  24. Hines, James R. Jr., 1999. "Lessons from Behavioral Responses to International Taxation," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 305-22, June.
  25. Hines, James R. Jr., 1999. "The Case against Deferral: A Deferential Reconsideration," National Tax Journal, National Tax Association, vol. 52(n. 3), pages 385-404, September.
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Citations

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Cited by:
  1. Kevin S Markle, 2012. "A Comparison of the Tax-motivated Income Shifting of Multinationals in Territorial and Worldwide Countries," Working Papers 1206, Oxford University Centre for Business Taxation.
  2. Rousslang, Donald J., 2000. "Deferral and the Optimal Taxation of International Investment Income," National Tax Journal, National Tax Association, vol. 53(n. 3), pages 589-600, September.

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