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U.S. tax policy and the overseas activities of U.S. multinational corporations: a quantitative assessment


  • Goodspeed, Timothy
  • Frisch, Daniel


We present 1984 data on U.S. multinationals, their foreign operations, and repatriations received from their controlled foreign corporations (CFCs), and explore the ramifications of the 1986 Tax Reform Act’s lowering of the corporate tax rate from 46 to 34 percent. We identify and quantify the effects on investment and financial decisions of U.S. multinationals that are attributed to the foreign tax credit and deferral. We find that the lowering of the rate has a large impact on excess credit positions, present evidence indicating that the composition of foreign source income has an important effect on such positions, find that the violation of capital export neutrality is likely to be widespread, and explore the impact of repealing deferral. The data relating to financial decisions shows mixed support for current theories.

Suggested Citation

  • 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.
  • Handle: RePEc:pra:mprapa:39389

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    References listed on IDEAS

    1. Hartman, David G., 1985. "Tax policy and foreign direct investment," Journal of Public Economics, Elsevier, vol. 26(1), pages 107-121, February.
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    Cited by:

    1. James R. Hines, Jr., 1994. "No Place Like Home: Tax Incentives and the Location of R&D by American Multinationals," NBER Chapters,in: Tax Policy and the Economy, Volume 8, pages 65-104 National Bureau of Economic Research, Inc.
    2. Rosanne Altshuler & Jack Mintz, 1995. "U.S. interest-allocation rules: Effects and policy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 2(1), pages 7-35, February.
    3. Joel Slemrod, 1990. "The Impact of the Tax Reform Act of 1986 on Foreign Direct Investment to and from the United States," NBER Working Papers 3234, National Bureau of Economic Research, Inc.
    4. James R. Hines, Jr. & R. Glenn Hubbard, 1990. "Coming Home To America: Dividend Repatriations By U.S. Multinationals," NBER Chapters,in: Taxation in the Global Economy, pages 161-208 National Bureau of Economic Research, Inc.
    5. Rosanne Altshuler, 1995. "Do Repatriation Taxes Matter? Evidence from the Tax Returns of U.S. Multinationals," NBER Chapters,in: The Effects of Taxation on Multinational Corporations, pages 253-276 National Bureau of Economic Research, Inc.
    6. Roy D.. Hogg & Jack Mintz & Joel Slemrod, 1993. "Impacts of Canadian and U.S. Tax Reform on the Financing of Canadian Subsidiaries of U.S. Parents," NBER Chapters,in: Studies in International Taxation, pages 47-76 National Bureau of Economic Research, Inc.
    7. Rosanne Altshuler & T. Scott Newlon & Joel Slemrod, 1993. "The Effects of U.S. Tax Policy on the Income Repatriation Patterns of U. S . Multinational Corporations," NBER Chapters,in: Studies in International Taxation, pages 77-116 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. James R. Hines & Eric M. Rice, 1994. "Fiscal Paradise: Foreign Tax Havens and American Business," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 149-182.

    More about this item


    tax policy; multinationals; deferral; foreign tax credits; controlled foreign corporations; tax reform; 1986 Tax Reform Act;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies


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