New Foundations for Taxing Multinational Corporations
17 Pages Posted: 5 Jan 2004
Date Written: December 2003
In order to suggest new foundations for the taxation of multinational corporations, this paper revisits the legislative foundations for much of the international tax regime and distills the lessons of recent economic research. The review of the Revenue Act of 1962 suggests that the international provisions that remain today were the result of a political miscalculation, were targeted at transient concerns, and were expanded well beyond their original scope as the result of administrative complexities. Evidence from the 1960s and 1990s is also suggestive of the fact that anti-deferral provisions may foster the tax avoidance and tax haven activities that they seek to combat. Recent research on the growing role of non-income taxes, the interactions between tax systems and corporate governance and new welfare benchmarks that arise from viewing FDI as being associated with productivity differences all recommend alternative rules for taxing the activities of U.S. multinational firms than are currently in place.
Keywords: Multinational, subpart F, deferral, evasion, avoidance, taxation, international
JEL Classification: F20, H25
Suggested Citation: Suggested Citation