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Rethinking Foreign Tax Creditability

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  • Shaviro, Daniel N.

Abstract

International tax policy experts often mistakenly conflate two distinct margins: (1) the overall tax burden on outbound investment, and (2) the marginal reimbursement rate (MRR) for foreign taxes paid, which is 100 percent under a foreign tax credit system, but equals the marginal tax rate for foreign source income under an explicit or implicit deductibility system (such as exemption). From a unilateral national welfare standpoint, whatever the right answer at margin (1), deductibility is clearly optimal, and creditability dangerously over-generous, at margin (2).

Suggested Citation

  • Shaviro, Daniel N., 2010. "Rethinking Foreign Tax Creditability," National Tax Journal, National Tax Association;National Tax Journal, vol. 63(4), pages 709-721, December.
    • Handle: RePEc:ntj:journl:v:63:y:2010:i:4:p:709-21
    DOI: 10.17310/ntj.2010.4.06
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    References listed on IDEAS

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    1. Desai, Mihir A. & Hines, James R. Jr., 2004. "Old Rules and New Realities: Corporate Tax Policy in a Global Setting," National Tax Journal, National Tax Association;National Tax Journal, vol. 57(4), pages 937-960, December.
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