Rethinking Foreign Tax Creditability

Daniel Shaviro
2010 Social Science Research Network  
International tax policy experts often mistakenly confl ate two distinct margins: (1) the overall tax burden on outbound investment, and (2) the marginal reimbursement rate (MRR) for foreign taxes paid, which is 100 percent under a foreign tax credit system, but equals the marginal tax rate for foreign source income under an explicit or implicit deductibility system (such as exemption). From a unilateral national welfare standpoint, whatever the right answer at margin (1), deductibility is
more » ... ductibility is clearly optimal, and creditability dangerously over-generous, at margin (2).
doi:10.2139/ssrn.1619962 fatcat:w4mycu4vufge3amo64y2pxi2su