|Statement||James R. Hines, Jr.|
|Series||NBER working paper series -- working paper no. 5589, Working paper series (National Bureau of Economic Research) -- working paper no. 5589.|
|Contributions||National Bureau of Economic Research.|
|The Physical Object|
|Pagination||43,  p. ;|
|Number of Pages||43|
Despite enactment of the Tax Cuts and Jobs Act, which reduced these incentives, current rules still encourage US multinational firms to earn and report profits in low-tax foreign countries, enable both US- and foreign-based firms to shift profits earned in the United States to other countries, and encourage companies to incorporate in. Downloadable! This paper reviews quantitative studies of the impact of international tax rules on the financial and real behavior of multinational firms. The evidence, much of it recent, indicates that taxation significantly influences foreign direct investment, corporate borrowing, transfer pricing, dividend and royalty payments, R&D activity, exports, bribe payments, and location choices. “Lessons the United States Can Learn from Other Countries’ Territorial Systems for Taxing Income of Multinational Corporations.” Washington, DC: Urban-Brookings Tax Policy Center. Clausing, Kimberly A. "Profit Shifting Before and After the Tax Cuts and Jobs Act." Janu Dharmapala, Dhammika. The current systems used by most countries tax foreign affiliates of a multinational corporation as if they were separate entities, even if the affiliates have common ownership. Each affiliate pays corporate income tax to the source country where it produces goods and services on the income generated by those activities.
A. Despite enactment of the Tax Cuts and Jobs Act, which reduced these incentives, current rules still encourage US multinational firms to earn and report profits in low-tax foreign countries, enable both US- and foreign-based firms to shift profits earned in the United States to other countries, and encourage companies to incorporate in foreign jurisdictions. The new tax law, however, departs from territorial taxation in its treatment of intangible profits, which represent the bulk of profits for some of the largest US multinational corporations. Because TCJA eliminated the tax on repatriated dividends, it increased the rewards for income shifting: profits now not only accrue tax-free overseas, but. The recent debate about tax avoidance by multinational firms like Amazon or Starbucks has brought corporate taxation to the top of the international policy agenda. The taxation of multinational companies is a challenging and complex issue – countries want to make sure that corporations bear a fair part of the overall tax burden, but they also. Finally, in a sample of multinational corporations only, I find that higher levels of U.S. pre‐tax income are associated with lower U.S. and foreign ETRs, while higher levels of foreign pre‐tax income are associated with higher U.S. and foreign ETRs. Thus, large amounts of foreign income are associated with higher corporate tax burdens.
The OECD estimates that 4 to 10 per cent of global corporate tax revenues are lost due to avoidance and evasion practices by firms. Yet, the reforms undertaken in recent years are insufficient to eliminate tax avoidance by multinational corporations. The growing worldwide importance of international business activities has in recent years lead to serious reexaminations of the ways that governments tax multinational corporations. In the United States, much of the debate concerns the competitive positions of . Over the past 30 years, many countries have moved away from “worldwide” tax systems that tax their domestic corporations’ worldwide profits. Instead, many countries have what is called a “territorial” tax system. A territorial tax system generally allows corporations to deduct or exclude the majority of dividends received from their foreign operations. Currently, 91 countries . As another ITEP report explains, this provision would, in the long-run, reduce taxes for American multinational corporations by hundreds of billions of dollars.; Institute on Taxation and Economic Policy, “Multinational Corporations Would Receive $ Billion in Tax Breaks from Congressional Repatriation Proposal,” Decem