NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Taxing Multinationals

Michael P. Devereux, R. Glenn Hubbard

NBER Working Paper No. 7920
Issued in September 2000
NBER Program(s):   IFM   PE

This paper analyzes the effects of tax policy on the strategic choices of a domestic multinational company competing with a foreign multinational company in a third country. We demonstrate the role of the effective average tax rate and the effective marginal tax rate on the company's choices. We consider the impact on national welfare of alternative tax policies for outbound investment. Our results differ from existing models. In contrast to Feldstein and Hartman (1979), in our model, taxing foreign source income on accrual with a deduction for foreign taxes is not generally optimal. However, unlike Mintz and Tulkens (1996), the optimal policy for domestic and outbound investment is linked through the strategic choices of the multinational.

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Document Object Identifier (DOI): 10.3386/w7920

Published: Devereux, Michael P. and R. Glenn Hubbard. "Taxing Multinationals," International Tax and Public Finance, 2003, v10(4,Aug), 469-487. citation courtesy of

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