US Taxation of Foreign Income

by Gary Clyde Hufbauer and Ariel Assa
October 2007
Book Description

Since 1992, new issues have arisen in international taxation—for example, taxation of electronic commerce, novel means of shielding passive income, the World Trade Organization (WTO) debate over the foreign sales corporation and subsequent passage of the American Jobs Creation Act of 2004, the problem of corporate inversions, and alleged "earnings stripping" by foreign-based multinational enterprises (MNEs) operating in the United States. In the meantime, US-based MNEs operating abroad have used a variety of methods to cut the effective US tax on repatriated foreign source income to around 2 percent. This revised study analyzes the impact of taxes on industry location and profit shifting using new panel econometric studies. It also discusses and evaluates new paradigms that have been suggested for the international tax system.

Selected chapters and sections are provided for preview only.



1. Introduction [pdf]

2. Corporate Taxation

3. Traditional Tax Doctrine for Foreign Income

4. Residence Taxation for Portfolio Investment Income

5. Multinational Firms in the World Economy [pdf]

6. Agenda for Modest Reform: A Territorial System

Appendix A1
History of US Taxation of Foreign Income of US Corporations (Excluding Merchandise Export Income)

Appendix A2
History of US Foreign Tax Credit Limitations

Appendix A3
History of US Deferral of Current Taxation of Controlled Foreign Corporations

Appendix A4
History of US Taxation of Merchandise Export Income

Appendix A5
History of US Taxation of Foreign Corporations Doing Business in the United States

Appendix A6
History of Source-of-Income Rules Prior to the Tax Reform Act of 1986

Appendix A7
Comparison of Source-of-Income Rules Before and After the Tax Reform Act of 1986

Appendix A8
Allocation-of-Expenses Rules

Appendix A9
History of Rules for Intercompany Pricing Between US and Affiliated Foreign Corporations

Appendix B
Methods for Reducing Corporate Income Taxes

Appendix C1
A Simple Model of World Portfolio Capital Flows

Appendix C2
Temporary Taxes on Portfolio Capital

Appendix C3
Conditions for Reimbursement of the Backup Withholding Tax

Appendix D
The Simple Economics of Imperfect Competition

Appendix E
Electronic Commerce

Appendix F
Revenue on Foreign Investment in the United States



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Book Data

October 2007
ISBN paper 978-0-88132-405-1
319 pp.

Commentaries on This Book

"A studious, heavily researched assessment, highly recommended especially for anyone involved in crafting American Tax Policy."

Midwest Book Review

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