Do Repatriation Taxes Matter? Evidence from the Tax Returns of U.S. Multinationals
In: The Effects of Taxation on Multinational Corporations
An open question in the literature on the taxation of multinational corporations is whether repatriation taxes influence whether the profits of foreign subsidiaries are repatriated or reinvested abroad. Theoretical models suggest that dividend remittances should not be influenced by repatriation taxes. The results of recent empirical work indicate that dividend remittances are sensitive to repatriation taxes. This paper investigates whether the empirical evidence can be reconciled with the theoretical results by recognizing that repatriation taxes on dividends may vary over time and provide firms with an incentive to time repatriations so that they occur in years when repatriation tax rates are relatively low. We use information about cross- country differences in tax rates to separately estimate the influence of permanent tax changes, as would occur due to changes in statutory tax rates, and transitory tax changes on dividend repatriations. Our data contains U.S. tax return information for a large sample of U.S. corporations and their foreign subsidiaries. We find that the permanent tax price effect is significantly different from the transitory price effect and is not significantly different from zero, while the transitory tax price effect is negative and significant. This suggests that repatriation taxes do affect dividend repatriation behavior but only to the extent that they vary over time. Previous empirical work has apparently measured the effect of timing behavior.
(This abstract was borrowed from another version of this item.)
|This chapter was published in: ||This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number
7746.||Handle:|| RePEc:nbr:nberch:7746||Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Goodspeed, Timothy & Frisch, Daniel, 1989. "U.S. tax policy and the overseas activities of U.S. multinational corporations: a quantitative assessment," MPRA Paper 39389, University Library of Munich, Germany.
- Bradford, David F., 1981.
"The incidence and allocation effects of a tax on corporate distributions,"
Journal of Public Economics,
Elsevier, vol. 15(1), pages 1-22, February.
- 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.
- 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, vol. 51(1), pages 75-96, May.
- Alan J. Auerbach, 1980.
"Wealth Maximization and the Cost of Capital,"
NBER Working Papers
0254, National Bureau of Economic Research, Inc.
- James R. Hines Jr., 1992.
"Credit and Deferral as International Investment Incentives,"
NBER Working Papers
4191, National Bureau of Economic Research, Inc.
- Hines, James Jr., 1994. "Credit and deferral as international investment incentives," Journal of Public Economics, Elsevier, vol. 55(2), pages 323-347, October.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberch:7746. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.