Rethinking Foreign Tax Creditability Daniel Shaviro NY - PDF document

1Foreign Tax CreditabilityDaniel ShaviroNYU Law School variables –e.g., rate on foreign source income, credit limits.) Should we view them as mere transfers (likedomestic taxes) (Agencycost issue if adopted by policymakers.) FTCstreat it as irrelevant whether taxes are paid to oneself or crediting others’taxes in But this requires unrealistic reciprocity –same tax rates, credits not exemption, don’t “cheat”on credit limits, reciprocal Hence, we want TPsto be indifferent between a $1 foreign tax income(given possibility of other adjustments). Now consider Case 1: foreigne incentive problem is fundamental. NOT an “abuse”issue!!! Not at all -in fact it’s quite a familiar result.ness margin (my interest in this paper), although they differ atthe U.S. tax burden on “outbound”investment margin. (Scare quotes because “outbound”i Not an empirical paper -but note that every dollar of FTC US TPsmay over-invest in high-tax relative to low-tax not actually having a pure WW, But all this is no defense of FTCsin principle, & creates its FTC limits, separate baskets, “specific economic benefit”rule, A powerful trope in domestic U.S. politics –but the # of times one is tic inquiries –e.g.: Is the same (potentially affecting incentives & distribution).“double taxation”but relative burden 2) Needed for capital export neutrality (CEN) –albeit that an pretax profitability by making re (b) Restrict allowabilityof foreign tax credits.