Abstract

http://ssrn.com/abstract=1663771
 
 

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A Burden-Neutral Shift from Foreign Tax Creditability to Deductibility?


Kimberly A. Clausing


Reed College - Department of Economics

Daniel Shaviro


New York University School of Law

October 27, 2010

Tax Law Review, Vol. 64, No. 4, 2011
NYU Law and Economics Research Paper No. 10-39

Abstract:     
Observers of international tax rules have long conflated two distinct effects of the foreign tax credit on multinational firms: the effect on the incentive to invest abroad and the effect on foreign tax sensitivity. With national welfare as the policy objective, we discuss how a burden neutral shift from foreign tax credits to deductibility could be designed to improve distortions associated with insensitivity to foreign taxation without raising aggregate burdens on outward foreign investment. We also provide new evidence suggesting that the tax sensitivity of outward foreign direct investment is indeed reduced for OECD countries using foreign tax credits, in comparison with other OECD countries. Finally, we discuss policy considerations surrounding a possible burden-neutral shift from foreign tax creditability to deductibility.

Number of Pages in PDF File: 23

Keywords: International Taxation, Foreign Tax Credits

JEL Classification: H20, H21, H25, H73

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Date posted: August 24, 2010 ; Last revised: October 9, 2011

Suggested Citation

Clausing, Kimberly A. and Shaviro, Daniel, A Burden-Neutral Shift from Foreign Tax Creditability to Deductibility? (October 27, 2010). Tax Law Review, Vol. 64, No. 4, 2011; NYU Law and Economics Research Paper No. 10-39. Available at SSRN: http://ssrn.com/abstract=1663771

Contact Information

Kimberly A. Clausing
Reed College - Department of Economics ( email )
3203 SE Woodstock Boulevard
Portland, OR 97202-8199
United States
503-517-7388 (Phone)
503-777-7776 (Fax)
Daniel Shaviro (Contact Author)
New York University School of Law ( email )
40 Washington Square South
Room 314-B
New York, NY 10012-1099
United States
212-998-6187 (Phone)
212-995-4341 (Fax)
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