22 Pages Posted: 4 Jun 2010 Last revised: 9 Jul 2010
Date Written: June 3, 2010
International tax policy experts often mistakenly conflate two distinct margins: (1) the overall tax burden on outbound investment, and (2) the marginal reimbursement rate (MRR) for foreign taxes paid, which is 100 percent under a foreign tax credit system, but equals the marginal tax rate for foreign source income under an explicit or implicit deductibility system (such as exemption). From a unilateral national welfare standpoint, whatever the right answer at margin (1), deductibility is clearly optimal, and creditability dangerously over-generous, at margin (2).
Keywords: international taxation, foreign tax credits, double taxation
JEL Classification: H20, H21, H25, H73
Suggested Citation: Suggested Citation
Shaviro, Daniel, Rethinking Foreign Tax Creditability (June 3, 2010). NYU Law and Economics Research Paper No. 10-30. Available at SSRN: https://ssrn.com/abstract=1619962 or http://dx.doi.org/10.2139/ssrn.1619962