The Business Cycle and the Deduction for Foreign Derived Intangible Income: A Historical Perspective

Dowd, Tim; Landefeld, Paul

doi:10.2139/ssrn.3217279

Cited by 3 publications

(3 citation statements)

References 11 publications

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“…Like the limit on interest deductibility, the impact of FDII will depend on a firms' total operations, including its tax positions now and in the future. Estimates by Dowd and Landefeld (2018) using historical data suggest that FDII would have provided significant (though procyclical) benefits, suggesting the cases where effective tax rates decline are more common.…”

Section: Table 2 Effective Tax Rates Standard Tax Systemmentioning

confidence: 99%

Tax Spillovers from US Corporate Income Tax Reform

Beer

Klemm²,

Matheson³

2018

IMF Working Papers

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This paper describes, and where possible tentatively quantifies, likely tax spillovers from the U.S. corporate income tax reform that was part of the broader 2017 tax reform. It calculates effective tax rates under various assumptions, showing among other findings, how the interest limitation and the Foreign Derived Intangible Income provision can raise or reduce rates. It tentatively estimates that under constant policies elsewhere, the rate cut will reduce tax revenue from multinationals in other countries by on average 1.6 to 4.5 percent. If other countries react in line with historical reaction functions, the revenue loss from multinationals rises to an average of 5.2 to 13.5 percent. The paper also discusses profit-shifting, real location, and policy reactions from the more complex features of the reform.

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Section: Table 2 Effective Tax Rates Standard Tax Systemmentioning

confidence: 99%

Tax Spillovers from US Corporate Income Tax Reform

Beer

Klemm²,

Matheson³

2018

IMF Working Papers

View full text Add to dashboard Cite

show abstract

“…Dowd and Landefeld (2018).40 This includes both U.S. companies and foreign companies with income effectively connected with a U.S. trade or business but does not cover individuals, S-corporations, regulated investment companies or real estate investment trusts.41 The rate rises to 10 percent for 2019-25, and 12.5 percent thereafter.©International Monetary Fund. Not for Redistribution…”

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confidence: 99%

The Tax Cuts and Jobs Act: An Appraisal

Chalk¹,

Keen²,

Perry³

2018

IMF Working Papers

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This paper assesses the landmark Tax Cuts and Jobs Act (TCJA), from the perspective of both the U.S. itself and the wider world. The reform has many positive aspects including steps to broaden the base of, and reduce marginal rates under, the personal income tax (PIT), reduce distortions to investment and financing decisions, and mitigate outward profit shifting. But the TCJA has a large fiscal price tag and leaves significant uncertainty as to how the U.S. tax system will develop. The PIT changes could have better targeted relief at low earners, and there is scope to more fully address distortions in business taxation. The novel international provisions create a complex array of both positive and negative international spillovers, and have the potential to significantly reshape the wider international tax system.

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“…There’s an overlap between companies claiming benefits from the FDII deduction and those that claimed the domestic production activities benefit repealed by TCJA. Dowd and Landefeld ( 2018 ) have demonstrated the parallels between the recipients of prior export subsidies (and their replacement, the IRC § 199 deduction) and the beneficiaries of the FDII deduction, notwithstanding that the stated goals and mechanics of the provisions are different. Estimates are that the top one percent of companies that claim an FDII benefit realized 85 percent of the total (Dowd & Landefeld, 2018 ).…”

Section: The Tcja: Policy Advice Gone Wrong?mentioning

confidence: 99%

Designing international tax reform: lessons from TCJA

Herzfeld

2021

Int Tax Public Finance

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The Tax Cuts & Jobs Act (TCJA) introduced the most significant changes to the US international tax system in decades. The law changes have been criticized for reducing equity, benefiting wealthier business owners at the expense of individuals in the long term (while also increasing the deficit) adding to complexity, and creating incentives for shifting profits and activities offshore. These critiques give rise to the question of how best, and under what criteria, to evaluate the changes to the international tax system brought about by the US tax reform. This paper analyzes the tax law changes adopted in the TCJA that impact cross-border investment within the context of several decades of policy proposals that recognized the flaws and deficiencies of the prior system and attempted to develop proposals that balanced creating incentives for the efficient use of capital and the benefits of US investment overseas while minimizing incentives for profit shifting. Reviewing the various provisions of the law in the context of a series of reform proposals made over the previous decade shows the extent to which most of the international law changes introduced by the TCJA closely followed these well-developed ideas. And yet, there appears to be a disconnect between the goals of the law change and the extent to which the laws as enacted have effectuated that change. The divergence provides a cautionary tale for public finance economists wishing to engage in international tax regime change.

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The Business Cycle and the Deduction for Foreign Derived Intangible Income: A Historical Perspective

Cited by 3 publications

References 11 publications

Tax Spillovers from US Corporate Income Tax Reform

Tax Spillovers from US Corporate Income Tax Reform

The Tax Cuts and Jobs Act: An Appraisal

Designing international tax reform: lessons from TCJA

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