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The taxation of foreign profits - the old view, the new view and a pragmatic view

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  • Johannes Becker

    () (Institute of Public Economics I, University of Muenster)

  • Clemens Fuest

    () (Oxford University Centre for Business Taxation)

Abstract

In this short paper, we review the criticism of the standard view (the ’old view’) of foreign profit taxation which goes back to Peggy Musgrave (née Richman, 1963). This ?new view of international taxation is based on recent empirical studies and favours a system where foreign profits are exempt from tax. We critically discuss the debate between old view and new view proponents and, finally, confront the two with a ?pragmatic view on foreign profit taxation which crucially builds on compliance and tax administration cost.

Suggested Citation

  • Johannes Becker & Clemens Fuest, 2011. "The taxation of foreign profits - the old view, the new view and a pragmatic view," Working Papers 1104, Oxford University Centre for Business Taxation.
  • Handle: RePEc:btx:wpaper:1104
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    References listed on IDEAS

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    1. 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 447-461, September.
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    4. Johannes Becker, 2014. "Strategic Trade Policy through the Tax System," The World Economy, Wiley Blackwell, vol. 37(9), pages 1237-1246, September.
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    6. Homburg, Stefan, 2005. "Internationale Kapitaleinkommensbesteuerung nach dem Wohnsitzprinzip oder dem Quellenprinzip," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 14-27.
    7. Helen Simpson, 2007. "Investment abroad and adjustment at home: evidence from UK multinational firms," IFS Working Papers W07/07, Institute for Fiscal Studies.
    8. Thomas Horst, 1980. "A Note on the Optimal Taxation of International Investment Income," The Quarterly Journal of Economics, Oxford University Press, vol. 94(4), pages 793-798.
    9. Michael P. Devereux, 2008. "Taxation of outbound direct investment: economic principles and tax policy considerations," Oxford Review of Economic Policy, Oxford University Press, vol. 24(4), pages 698-719, winter.
    10. Desai, Mihir A. & Hines, James R. Jr., 2004. "Old Rules and New Realities: Corporate Tax Policy in a Global Setting," National Tax Journal, National Tax Association, vol. 57(4), pages 937-960, December.
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    12. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, pages 83-100.
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    14. Dhammika Dharmapala & C. Fritz Foley & Kristin J. Forbes, 2011. "Watch What I Do, Not What I Say: The Unintended Consequences of the Homeland Investment Act," Journal of Finance, American Finance Association, vol. 66(3), pages 753-787, June.
    15. Johannes Becker, 2013. "Taxation of Foreign Profits with Heterogeneous Multinational Firms," The World Economy, Wiley Blackwell, vol. 36(1), pages 76-92, January.
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    17. Johannes Becker & Clemens Fuest, 2010. "Taxing Foreign Profits With International Mergers And Acquisitions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(1), pages 171-186, February.
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    Cited by:

    1. Katrin Hohler, 2013. "The introduction of the exemption system for foreign profits and its effects on international acquisitions – the UK and Japan regaining international tax competitiveness?," Journal of Applied Accounting Research, Emerald Group Publishing, vol. 14(3), pages 224-247, November.
    2. Federica Liberini, 2014. "Corporate Taxes and the Growth of the Firm," KOF Working papers 14-354, KOF Swiss Economic Institute, ETH Zurich.
    3. Liberini, Federica, 2014. "Corporate Taxes and the Growth of the Firm," The Warwick Economics Research Paper Series (TWERPS) 1042, University of Warwick, Department of Economics.

    More about this item

    Keywords

    Corporate Taxation; Multinational Firms; Repatriation;

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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