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Rethinking Foreign Tax Creditability

Daniel Shaviro

New York University School of Law

June 3, 2010

NYU Law and Economics Research Paper No. 10-30

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).

Number of Pages in PDF File: 22

Keywords: international taxation, foreign tax credits, double taxation

JEL Classification: H20, H21, H25, H73

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Date posted: June 4, 2010 ; Last revised: July 9, 2010

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

Contact Information

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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