Credit and Deferral as International Investment Incentives / James R. Hines Jr..

Format:

Book

Author/Creator:

Hines, James R, Jr.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w4191.

NBER working paper series no. w4191

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1992.

Summary:

The US government taxes the foreign income of American firms, using a system that grants credits for foreign taxes paid and permits tax deferral for unrepatriated income. This paper shows that the tax system encourages firms to restrict their equity stakes in new foreign investments, and to finance their new investments with considerable debt. These incentives are strongest for US investments in low-tax foreign countries, and exist even when transfer price regulation effectively limits the profit rates foreign subsidiaries can earn. The behavior of US multinationals in 1984 appears to reflect these tax incentives.

Notes:

Print version record

October 1992.