Deferral of U.S. taxes on foreign source income is commonly characterized as a subsidy to foreign investment, as reflected in its inclusion among "tax expenditures" and occasional calls for its repeal. This paper analyzes the extent to which tax deferral and other policies inefficiently...

This paper examines the investment effects of tax subsidies for which some assets and not others are eligible. Distortionary tax subsidies concentrate investments in tax-favored assets, thereby reducing the expected pre-tax profitability of investment and reducing payoffs to bondholders in the...

The economic changes associated with globalization tighten financial pressures on governments of high-income countries by increasing the demand for government spending while making it more costly to raise tax revenue. Greater international mobility of economic activity, and associated...

This paper examines the impact of the 1986 change in U.S. interest allocation rules on the investment and financing decisions of American multinationals. The 1986 change reduced the tax deductibility of the interest expenses of firms with excess foreign tax credits. The resulting increase in the...

Despite the frequency of tax changes and their potential importance to investors, almost all of the analysis of tax-based investment incentives assumes investors never anticipate any tax changes. We depart from this approach by analyzing the historical pattern of U.S. corporate investment...

This paper reviews quantitative studies of the impact of international tax rules on the financial and real behavior of multinational firms. The evidence, much of it recent, indicates that taxation significantly influences foreign direct investment, corporate borrowing, transfer pricing, dividend...

This paper examines the impact of the Tax Reform Act of 1986 (TRA) on international joint ventures by American firms. The evidence suggests that the TRA had a significant effect on the organizational form of U.S. business activity abroad. The TRA mandates the use of separate credits on income...

This paper examines the investment effects of tax subsidies for which some assets and not others are eligible. Distortionary tax subsidies encourage firms to concentrate investments in tax-favored assets profitability of investment and reducing payoffs to bondholders in the event of default....

The taxation of corporate assets is well understood to influence investment and firm valuation. This paper explores the consequences of postwar U.S. tax changes in a dynamic model which incorporates costs of adjustment and investor expectations of future tax reforms and macroeconomic...

Fundamental tax reform, replacing the income tax with a sales tax, is commonly thought to reduce levels of criminal and other 'underground' economic activity by implicitly taxing their returns. This paper finds instead that the impact of tax reform depends on the relative labour intensity of...