Repatriation Taxes, Repatriation Strategies and Multinational Financial Policy
NBER Working Paper No. 8144
Several investment-repatriation strategies are added to the standard model of a multinational in which an affiliate is located in a low-tax country and is limited to two alternatives: repatriating taxable dividends to the parent or investing in its own real operations. In our model, affiliates can invest in passive assets, which the parent can borrow against, or in related affiliates which can be used as vehicles for tax-favored repatriations. We show analytically how the availability of alternative strategies can effect real investment throughout the worldwide corporation. We use firm level data for U.S. multinationals to test for the importance of alternative strategies. The evidence is generally consistent with the theory, particularly the strategies using related affiliates.
Published: Altshuler, Rosanne and Harry Grubert. "Repatriation Taxes, Repatriation Strategies And Multinational Financial Policy," Journal of Public Economics, 2003, v87(1,Jan), 73-107.