The New US Tax Preference for 'Foreign-Derived Intangible Income'

The new US income tax deduction for “foreign-derived intangible income” effectively lowers the corporate tax rate — from 21% to around 13% — on export-generated income attributable to intangible assets. This paper considers the new provision both in relation to international trade and tax agreements and as a matter of national policy. It argues that FDII is not clearly in violation of international agreements — as has been claimed — but is difficult to justify from a national policy perspective