Rethinking Foreign Tax Creditability

22 Pages Posted: 4 Jun 2010 Last revised: 9 Jul 2010

See all articles by Daniel Shaviro

Daniel Shaviro

New York University School of Law

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

Shaviro, Daniel, Rethinking Foreign Tax Creditability (June 3, 2010). NYU Law and Economics Research Paper No. 10-30. Available at SSRN: or

Daniel Shaviro (Contact Author)

New York University School of Law ( email )

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Room 314-B
New York, NY 10012-1099
United States
212-998-6187 (Phone)
212-995-4341 (Fax)

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