Foreign Income and Domestic Deductions – a Comment
In this comment, we argue that — even in the model used by Hines — full deductibility of costs under the exemption system is incompatible with nationally optimal tax policy. We derive an optimality rule which suggests that cost apportionment rules are efficient. Our findings also imply that the exemption method should be accompanied by zero deductibility of costs if these costs are exclusively related to foreign source income.
Volume (Year): 63 (2010)
Issue (Month): 2 (June)
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