Taxing Multinationals

49 Pages Posted: 27 Sep 2000 Last revised: 19 Oct 2010

See all articles by Michael P. Devereux

Michael P. Devereux

Centre for Business Taxation, Oxford University; CESifo (Center for Economic Studies and Ifo Institute); Institute for Fiscal Studies (IFS); Centre for Economic Policy Research (CEPR); University of Oxford - Said Business School; University of Oxford - Said Business School

R. Glenn Hubbard

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Date Written: September 2000

Abstract

This paper analyzes the effects of tax policy on the strategic choices of a domestic multinational company competing with a foreign multinational company in a third country. We demonstrate the role of the effective average tax rate and the effective marginal tax rate on the company's choices. We consider the impact on national welfare of alternative tax policies for outbound investment. Our results differ from existing models. In contrast to Feldstein and Hartman (1979), in our model, taxing foreign source income on accrual with a deduction for foreign taxes is not generally optimal. However, unlike Mintz and Tulkens (1996), the optimal policy for domestic and outbound investment is linked through the strategic choices of the multinational.

Suggested Citation

Devereux, Michael P. and Hubbard, Robert Glenn, Taxing Multinationals (September 2000). NBER Working Paper No. w7920. Available at SSRN: https://ssrn.com/abstract=243615

Michael P. Devereux (Contact Author)

Centre for Business Taxation, Oxford University ( email )

Said Business School
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Oxford, OX1 1HP
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CESifo (Center for Economic Studies and Ifo Institute)

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Institute for Fiscal Studies (IFS) ( email )

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Centre for Economic Policy Research (CEPR)

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University of Oxford - Said Business School ( email )

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Oxford, OX1 1HP
Great Britain

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Robert Glenn Hubbard

Columbia Business School - Finance and Economics ( email )

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New York, NY 10027
United States

HOME PAGE: http://www.gsb.columbia.edu/faculty/ghubbard

National Bureau of Economic Research (NBER)

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