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Repatriation Taxes

Author

Listed:
  • Chadwick Curtis

    (University of Richmond)

  • Julio Garin

    (CLaremont McKenna College)

  • Saif Mehkari

    (University of Richmond)

Abstract

We present a model of a multinational firm to quantify the effects of policy changes in repatriation tax rates. The framework captures the dynamic responses of the firm from the time a policy change is anticipated through its enactment, including its long-run effects. We find that failing to account for anticipatory behavior surrounding a reduction in repatriation tax rates overstates the amount of profits repatriated from abroad and underestimates tax revenue losses. We further show that policy changes have a relatively small impact on hiring and investment decisions if firms have relatively easy access to credit markets – as is the case for most multinational firms. Finally, by altering the relative price of holding assets abroad, news of a future reduction in repatriation tax rates acts as an implicit tax on repatriating funds today. We capture and quantify this "shadow tax." (Copyright: Elsevier)

Suggested Citation

  • Chadwick Curtis & Julio Garin & Saif Mehkari, 2020. "Repatriation Taxes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 36, pages 293-313, April.
  • Handle: RePEc:red:issued:18-266
    DOI: 10.1016/j.red.2019.11.004
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    File URL: http://dx.doi.org/10.1016/j.red.2019.11.004
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    References listed on IDEAS

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    Cited by:

    1. Adam Hal Spencer, 2020. "Policy effects of international taxation on firm dynamics and capital structure," Discussion Papers 2020-25, University of Nottingham, GEP.

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    More about this item

    Keywords

    Tax reform; Repatriation taxes; Asset holding; Corporate tax;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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