Fuest, Clemens (2013) The taxation of foreign profits: a unified view. In: 69th Annual Conference of the International Institute of Public Finance (IIPF): 'The Role of the State in Growth and Development', 22/08/2013-25/08/2013, Taormina, Sicily..Full text not available from this repository.
This paper synthesizes and extends the literature on the taxation of foreign source income in a framework that covers both greenfield and acquisition investment, and a general constraint linking investment at home and abroad for the multinational by introducing a cost of adjustment for the mobile factor. Unless the cost of adjustment is zero, the domestic tax on foreign-source income should always be set to ensure the optimal allocation of the mobile factor between domestic and foreign assets and should follow the classical rules in the literature; national optimality requires the deduction rule, and global optimality requires the credit rule. Only in the zero-cost case does exemption become optimal. Allowances can be set so as to ensure that domestic and foreign asset purchases are undistorted by the tax system: this requires a cash-flow tax on domestic investment in the greenfield case, and a cross-border cash flow tax on foreign investment in both cases. These basic results extend to various extensions of the model.
|Item Type:||Conference or Workshop Item (Paper)|
|Centre:||Oxford University Centre for Business Taxation|
|Date Deposited:||16 Sep 2013 11:42|
|Last Modified:||23 Oct 2015 14:08|
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