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From page 151... ... Index A Accelerated Cost Recovery System, 55 Allocation rules, 2 application, 12 current U.S. law, 66 effects of corporate behavior, 5-6 interest rules, 16, 116-117, 124, 126 rationale, 65 R&D spending, 42-43, 117-118, 124125, 126 worldwide fungibility approach, 125126 Alternative incremental tax credit, 95 Alternative minimum tax, 7, 90, 115-116 incentive effects, 123-124 objective, 102 Anti-deferral rules, 2, 101-102 international comparison, 90 B Basket limitations, 16-17, 41 10-50 rule, 82 joint ventures, 82 Branch profits tax, 17, 115 151 C Canada, 83-84 Capital-export neutrality, 113, 121, 134 Capital-import neutrality, 113, 121 Capital-labor substitutability, 18, 19 Carryback/carryforward rules, 116 Competitiveness cost of capital and, 121-12 effects of 10-50 basket rule, 82 goals of TRA86, 81 international comparison, 6 production efficiency and, 111-112 for R&D investments, 82-84 as tax regime objective, 88-89, 111, 112 Complexity of tax code, 7, 136 business decision making and, 73 negative effects of, 112 reason for, 19-20, 113 source of, 72-73 Compliance costs current estimates, 123 as disincentives to investment, 112 international comparison, 90 R&D credit rules, 61-62 tax code, 7 Read the entire page →
From page 152... ... tax policy, 114 Exchange rates, 140 Export source rule, 15-16 F Financial services income, 16 Flat tax, 84, 127 Flat Tax proposal effects on R&D, 97-100 major features, 91, 92, 93, 94-95, 9697 Follow-on facilities, 5 Foreign direct investment capital movement and, 19 determinants, 118 effects of TRA86, 14, 15-16 elasticity, 18 exports and, 138 home country tax system as decisionmaking factor, 17-18 interest expense allocation rules and, 16 tax rule effects on, 5, 17-20, 118-121 in U.S. by foreign firms, 5, 18, 94 vs. Read the entire page →
From page 153... ... policy, 40, 114 rationale, 65 France, 12 Free trade appropriate unilateral tax policy for, 27-29 compatible tax structures, 25-27 current tax regimes, 35-36 evaluation of tax policies for consistency with, 29-35 strategies for implementation, 23, 36 tax regimes and, 23-24 theoretical basis, 21-23 G Germany, 66, 78 Global economy corporate trends, 1 globalization of corporations, 75-76 implications for tax reform, 109 joint venture alliances, 77 pressures for corporations, 143 tax structure for, 77-78 trends, 75, 135-136 153 Incentives alternative minimum tax as, 116, 123 124 effects on cost of capital, 118-121 R&D, 4-5, 83-84 in U.S. tax rules, 113-114 Income shifting, 15, 20 incentives, 32 mechanisms, 32 tax haven countries, 32-34 Income-shifting-adjusted cost of capital, 20 Incremental research and experimentation tax credit, 5 effectiveness in stimulating R&D, 59 effects on R&D cost structure, 55-59 legislation, 55 long-term implementation, 6 Interest allocation rules, 6-7, 124, 125 in business decision making, 5 country of origin, 116-117 R&D spending and, 116-117 reform, 125, 126 tax reform proposals, 100-101 under TRA86, 16 International comparison anti-deferral rules, 102 competitiveness, 6, 125 compliance burden, 90 effective tax burden, 7 principles of taxation for international firms, 11-12 R&D tax credits, 83-84 tax rate, 78 tax rules, 89-90 Investment business decision making, 3-5, 7, 13 disincentives in international tax provisions, 2, 3 effects of tax reform, 5-6 effects of TRA86, 13-14 facility placement decisions, 4 impact of R&D tax rules, 47-49, 54 international joint venture alliances, 77 social rate of return, 53 Read the entire page →
From page 154... ... 154 tax systems compatible with free trade in capital, 25-27 trends, 87 unilateral free trade taxation of capital income, 27-29 See also R&D J Japan, 11 Joint venture alliances, 77 10-50 basket rule, 82 L Labor supply capital-labor substitutability, 18, 19 elasticities, 18 R&D substitutability, 58 of technological future, 77 Loans, 90 Local content rules, 33 Location of business/facilities follow-on facilities, 5 mobility of operations, 68, 72 for R&D activities, 5, 71-72 residence-based taxation, 31-32 tax system influences on decision making, 4, 5, 18, 67-68, 71, 138-139 Location of income, 12 incentives to shift, 15 taxation for global efficiency, 30-31 theoretical modeling of incentives to shift, 20 treaty objectives, 134 Look-through rules, 95-96 M Manufacturing sector economic modeling, 54 impact of R&D tax policy on cost structure, 55-59 impact of R&D tax policy on investment, 54 technological future, 76 INDEX effect of R&D tax rules on cost structure, 55-59 effectiveness of R&D tax policy, 5960, 62 effects of R&D allocation rules, 48-49 effects of tax reform proposals, 97-100 empirical research needs, 20 incremental research and experimentation tax credit, 55-59 manufacturing sector price-demand, 54 public finance economics, 144 tax rule effects on foreign direct investment, 118-121 tax system effects on firm behavior, 18-19 Monopoly, 22 Monopsony, 22 Multinational corporations decision-making environment, 3-5 decision-making models, 18-20 earnings repatriation patterns, U.S., 35 eclectic theory of behavior, 18-19 foreign investment in U.S., 5 foreign tax credit basket limitations, 16-17 interest expense allocation rules, 16 location of income, 12 obstacles to modeling behavior of, 18 R&D allocation patterns, 3, 47-49, 6667 residence-based taxation, 31-32 response elasticities, 18 trends, 1, 87 U.S. tax system, 1-2, 40-42 N National Retail Sales Tax, 91, 92, 93, 94 95 Netherlands, 12 o Oligopolistic markets, 22 Omnibus Budget Reconciliation Act of 1989, 45 Read the entire page →
From page 155... ... firms, 49, 50 global collaboration, 76-77 global competition for investments, 82 84 historical development in U.S., 43-47 interest allocation rules and, 116-117 international distribution of benefits, 39-40 international technology transfer, 49-50 legally mandated, 66 opportunities for improving tax policy, 61-62 policy mechanisms for encouraging, 53-54, 55, 63 price demand elasticity, 47-48, 57-58 rationale for favored tax treatment, 39 royalty withholding policy and, 50 social rate of return, 53 stability of tax policy, 83 substitutability, 58 tax incentives, 4-5 tax reform, effects of, 5-6, 94-95, 96 100 tax reform proposals, 96-97 technological future, 76 U.S. tax policy, 39, 66, 95-96 Reform proposals R allocation patterns among multinationals, 3, 66-67 allocation rules, 2, 42-43, 117-118, 124-125, 126 business decision making, 3, 4-5, 7, 50 allocation rules, 126 anti-deferral rules, 101-102 common features, 91 conceptual basis, 137-139 destination principle taxation, 141 duration, 6, 71 effects on R&D, 94-95, 97-100 effects on withholding, 97 evaluation of, 90-91, 103 Read the entire page →
From page 156... ... tax rules, 95-96 S Sales tax, 91 Saving-Exempt Income tax, 127 INDEX Section 1.861-8, 43-45, 72 Section 1.861-17, 72 Section 904(g) , 72-75 Section 956A, 72 Sections 951-964, 78 Social rate of return, 53 Source-based taxation, 27, 111 State tax systems, 18 Subsidiaries, foreign, 2 T Tariffs free trade theory, 21-22 rationale, 22-23, 31-32 Tax havens, 19-20 global costs, 33 policy mechanisms, 32-33 rationale, 32 rationale for intervention, 33-34, 36 Tax policy capital-export/-import neutrality, 113, 121 competitiveness goals, 88-89, 111-112 conceptual evolution, 134-137 conflicts among objectives of, 113 constancy and consistency, 6, 71, 83 depreciation of R&D expenditures vs. Read the entire page →
From page 157... ... tax, 91, 92, 93, 94-95 effects on R&D, 97-100 major provisions, 96-97 U.S. international tax system 10-50 basket rule, 82 anti-deferral rules, 101-102 basic provisions, 1-2, 12-13, 40-42, 81, 114-115 complexity, 7, 72-73, 90 compliance costs, 7, 90 conceptual evolution, 134-137 concerns, 2-3 as corporate welfare, 81-82 credit for foreign tax payment, 1, 13, 16-17, 28, 29 disincentives for foreign firms, 73 distinctive features, 89-90 economic doctrine, 134-135 economic efficiency, 88, 121 effective tax burden, 6-7 effects on business decision making, 3 6,7 free trade compatibility, 28, 29, 36 historical development of R&D rules, 43-47 international comparison, 6, 7, 77 international joint venture alliances, 77 international response to reforms, 91 92 investment incentives, 113-114 near-term obsolescence, 75 policy formulation, 21 R&D rules, 39, 42-43, 66, 95-96, 117 reform proposals, 91 residual tax rate on foreign income, 67 Read the entire page →
From page 158... ... 158 revenue sources, 137 stability, 6 statutory corporate rate, 6 See also specific legislation or statute V Value-added tax, 94 Virtual corporations, 1, 76-77, 78 INDEX W Withholding tax foreign, in U.S. tax policy, 41-42 interest, 16-17 reform proposals, 97 rules for foreign corporations in U.S., 17 Read the entire page →

From page 151...

... Index A Accelerated Cost Recovery System, 55 Allocation rules, 2 application, 12 current U.S. law, 66 effects of corporate behavior, 5-6 interest rules, 16, 116-117, 124, 126 rationale, 65 R&D spending, 42-43, 117-118, 124125, 126 worldwide fungibility approach, 125126 Alternative incremental tax credit, 95 Alternative minimum tax, 7, 90, 115-116 incentive effects, 123-124 objective, 102 Anti-deferral rules, 2, 101-102 international comparison, 90 B Basket limitations, 16-17, 41 10-50 rule, 82 joint ventures, 82 Branch profits tax, 17, 115 151 C Canada, 83-84 Capital-export neutrality, 113, 121, 134 Capital-import neutrality, 113, 121 Capital-labor substitutability, 18, 19 Carryback/carryforward rules, 116 Competitiveness cost of capital and, 121-12 effects of 10-50 basket rule, 82 goals of TRA86, 81 international comparison, 6 production efficiency and, 111-112 for R&D investments, 82-84 as tax regime objective, 88-89, 111, 112 Complexity of tax code, 7, 136 business decision making and, 73 negative effects of, 112 reason for, 19-20, 113 source of, 72-73 Compliance costs current estimates, 123 as disincentives to investment, 112 international comparison, 90 R&D credit rules, 61-62 tax code, 7

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From page 152...

... tax policy, 114 Exchange rates, 140 Export source rule, 15-16 F Financial services income, 16 Flat tax, 84, 127 Flat Tax proposal effects on R&D, 97-100 major features, 91, 92, 93, 94-95, 9697 Follow-on facilities, 5 Foreign direct investment capital movement and, 19 determinants, 118 effects of TRA86, 14, 15-16 elasticity, 18 exports and, 138 home country tax system as decisionmaking factor, 17-18 interest expense allocation rules and, 16 tax rule effects on, 5, 17-20, 118-121 in U.S. by foreign firms, 5, 18, 94 vs.

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From page 153...

... policy, 40, 114 rationale, 65 France, 12 Free trade appropriate unilateral tax policy for, 27-29 compatible tax structures, 25-27 current tax regimes, 35-36 evaluation of tax policies for consistency with, 29-35 strategies for implementation, 23, 36 tax regimes and, 23-24 theoretical basis, 21-23 G Germany, 66, 78 Global economy corporate trends, 1 globalization of corporations, 75-76 implications for tax reform, 109 joint venture alliances, 77 pressures for corporations, 143 tax structure for, 77-78 trends, 75, 135-136 153 Incentives alternative minimum tax as, 116, 123 124 effects on cost of capital, 118-121 R&D, 4-5, 83-84 in U.S. tax rules, 113-114 Income shifting, 15, 20 incentives, 32 mechanisms, 32 tax haven countries, 32-34 Income-shifting-adjusted cost of capital, 20 Incremental research and experimentation tax credit, 5 effectiveness in stimulating R&D, 59 effects on R&D cost structure, 55-59 legislation, 55 long-term implementation, 6 Interest allocation rules, 6-7, 124, 125 in business decision making, 5 country of origin, 116-117 R&D spending and, 116-117 reform, 125, 126 tax reform proposals, 100-101 under TRA86, 16 International comparison anti-deferral rules, 102 competitiveness, 6, 125 compliance burden, 90 effective tax burden, 7 principles of taxation for international firms, 11-12 R&D tax credits, 83-84 tax rate, 78 tax rules, 89-90 Investment business decision making, 3-5, 7, 13 disincentives in international tax provisions, 2, 3 effects of tax reform, 5-6 effects of TRA86, 13-14 facility placement decisions, 4 impact of R&D tax rules, 47-49, 54 international joint venture alliances, 77 social rate of return, 53

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From page 154...

... 154 tax systems compatible with free trade in capital, 25-27 trends, 87 unilateral free trade taxation of capital income, 27-29 See also R&D J Japan, 11 Joint venture alliances, 77 10-50 basket rule, 82 L Labor supply capital-labor substitutability, 18, 19 elasticities, 18 R&D substitutability, 58 of technological future, 77 Loans, 90 Local content rules, 33 Location of business/facilities follow-on facilities, 5 mobility of operations, 68, 72 for R&D activities, 5, 71-72 residence-based taxation, 31-32 tax system influences on decision making, 4, 5, 18, 67-68, 71, 138-139 Location of income, 12 incentives to shift, 15 taxation for global efficiency, 30-31 theoretical modeling of incentives to shift, 20 treaty objectives, 134 Look-through rules, 95-96 M Manufacturing sector economic modeling, 54 impact of R&D tax policy on cost structure, 55-59 impact of R&D tax policy on investment, 54 technological future, 76 INDEX effect of R&D tax rules on cost structure, 55-59 effectiveness of R&D tax policy, 5960, 62 effects of R&D allocation rules, 48-49 effects of tax reform proposals, 97-100 empirical research needs, 20 incremental research and experimentation tax credit, 55-59 manufacturing sector price-demand, 54 public finance economics, 144 tax rule effects on foreign direct investment, 118-121 tax system effects on firm behavior, 18-19 Monopoly, 22 Monopsony, 22 Multinational corporations decision-making environment, 3-5 decision-making models, 18-20 earnings repatriation patterns, U.S., 35 eclectic theory of behavior, 18-19 foreign investment in U.S., 5 foreign tax credit basket limitations, 16-17 interest expense allocation rules, 16 location of income, 12 obstacles to modeling behavior of, 18 R&D allocation patterns, 3, 47-49, 6667 residence-based taxation, 31-32 response elasticities, 18 trends, 1, 87 U.S. tax system, 1-2, 40-42 N National Retail Sales Tax, 91, 92, 93, 94 95 Netherlands, 12 o Oligopolistic markets, 22 Omnibus Budget Reconciliation Act of 1989, 45

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From page 155...

... firms, 49, 50 global collaboration, 76-77 global competition for investments, 82 84 historical development in U.S., 43-47 interest allocation rules and, 116-117 international distribution of benefits, 39-40 international technology transfer, 49-50 legally mandated, 66 opportunities for improving tax policy, 61-62 policy mechanisms for encouraging, 53-54, 55, 63 price demand elasticity, 47-48, 57-58 rationale for favored tax treatment, 39 royalty withholding policy and, 50 social rate of return, 53 stability of tax policy, 83 substitutability, 58 tax incentives, 4-5 tax reform, effects of, 5-6, 94-95, 96 100 tax reform proposals, 96-97 technological future, 76 U.S. tax policy, 39, 66, 95-96 Reform proposals R allocation patterns among multinationals, 3, 66-67 allocation rules, 2, 42-43, 117-118, 124-125, 126 business decision making, 3, 4-5, 7, 50 allocation rules, 126 anti-deferral rules, 101-102 common features, 91 conceptual basis, 137-139 destination principle taxation, 141 duration, 6, 71 effects on R&D, 94-95, 97-100 effects on withholding, 97 evaluation of, 90-91, 103

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From page 156...

... tax rules, 95-96 S Sales tax, 91 Saving-Exempt Income tax, 127 INDEX Section 1.861-8, 43-45, 72 Section 1.861-17, 72 Section 904(g) , 72-75 Section 956A, 72 Sections 951-964, 78 Social rate of return, 53 Source-based taxation, 27, 111 State tax systems, 18 Subsidiaries, foreign, 2 T Tariffs free trade theory, 21-22 rationale, 22-23, 31-32 Tax havens, 19-20 global costs, 33 policy mechanisms, 32-33 rationale, 32 rationale for intervention, 33-34, 36 Tax policy capital-export/-import neutrality, 113, 121 competitiveness goals, 88-89, 111-112 conceptual evolution, 134-137 conflicts among objectives of, 113 constancy and consistency, 6, 71, 83 depreciation of R&D expenditures vs.

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From page 157...

... tax, 91, 92, 93, 94-95 effects on R&D, 97-100 major provisions, 96-97 U.S. international tax system 10-50 basket rule, 82 anti-deferral rules, 101-102 basic provisions, 1-2, 12-13, 40-42, 81, 114-115 complexity, 7, 72-73, 90 compliance costs, 7, 90 conceptual evolution, 134-137 concerns, 2-3 as corporate welfare, 81-82 credit for foreign tax payment, 1, 13, 16-17, 28, 29 disincentives for foreign firms, 73 distinctive features, 89-90 economic doctrine, 134-135 economic efficiency, 88, 121 effective tax burden, 6-7 effects on business decision making, 3 6,7 free trade compatibility, 28, 29, 36 historical development of R&D rules, 43-47 international comparison, 6, 7, 77 international joint venture alliances, 77 international response to reforms, 91 92 investment incentives, 113-114 near-term obsolescence, 75 policy formulation, 21 R&D rules, 39, 42-43, 66, 95-96, 117 reform proposals, 91 residual tax rate on foreign income, 67

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From page 158...

... 158 revenue sources, 137 stability, 6 statutory corporate rate, 6 See also specific legislation or statute V Value-added tax, 94 Virtual corporations, 1, 76-77, 78 INDEX W Withholding tax foreign, in U.S. tax policy, 41-42 interest, 16-17 reform proposals, 97 rules for foreign corporations in U.S., 17

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INDEX Pages 151-158

INDEX
Pages 151-158