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Taxation in the Global Economy

The increasing globalization of economic activity is bringing an awareness of the international consequences of tax policy. The move toward the common European market in 1992 raises the important question of how inefficiencies in the various tax systems—such as self-defeating tax competition among member nations—will be addressed. As barriers to trade and investment tumble, cross-national differences in tax structures may loom larger and create incentives for relocations of capital and labor; and efficient and equitable income tax systems are becoming more difficult to administer and enforce, particularly because of the growing importance of multinational enterprises. What will be the role of tax policy in this more integrated world economy?

Assaf Razin and Joel Slemrod gathered experts from two traditionally distinct specialties, taxation and international economics, to lay the groundwork for understanding these issues, which will require the attention of scholars and policymakers for years to come.

Contributors describe the basic provisions of the U.S. tax code with respect to international transactions, highlighting the changes contained in the U.S. Tax Reform Act of 1986; explore the ways that tax systems influence the decisions of multinationals; examine the effect of taxation on trade patterns and capital flows; and discuss the implications of the opening world economy for the design of optimal international tax policy. The papers will prove valuable not only to scholars and students, but to government economists and international tax lawyers as well.

454 pages | 62 figures, 60 tables | 6 x 9 | © 1990

National Bureau of Economic Research Project Report

Economics and Business: Economics--Government Finance, Economics--International and Comparative

Table of Contents

Introduction by Assaf Razin and Joel Slemrod
I. An Overview of the U.S. System of Taxing International Transactions
1. Taxing International Income: An Analysis of the U.S. System and Its Economic Premises
Hugh J. Ault and David F. Bradford
Comment: Daniel J. Frisch
II. Taxation and Multinationals
2. U.S. Tax Policy and Direct Investment Abroad
Joosung Jun
Comment: Michael P. Dooley
3. Tax Effects on Foreign Direct Investment in the United States: Evidence from a Cross-Country Comparison
Joel Slemrod
Comment: David G. Hartman
4. Multinational Corporations, Transfer Prices, and Taxes: Evidence from the U.S. Petroleum Industry
Jean-Thomas Bernard and Robert J. Weiner
Comment: Lorraine Eden
5. Coming Home to America: Dividend Repatriations by U.S. Multinationals
James R. Hines, Jr., and R. Glenn Hubbard
Comment: Mark A. Wolfson
III. The Effect of Taxation on Trade and Capital Flows
6. International Spillovers of Taxation
Jacob A. Frenkel, Assaf Razin, and Steve Symansky
Comment: Willem H. Buiter
7. International Trade Effects of Value-Added Taxation
Martin Feldstein and Paul Krugman
Comment: Avinash Dixit
8. Tax Incentives and International Capital Flows: The Case of the United States and Japan
A. Lans Bovenberg, Krister Andersson, Kenji Aramaki, and Sheetal K. Chand
Comment: Alan J. Auerbach
IV. Implications for Optimal Tax Policy
9. Integration of International Capital Markets: The Size of Government and Tax Coordination
Assaf Razin and Efraim Sadka
Comment: Jack M. Mintz
10. The Linkage between Domestic Taxes and Border Taxes
Roger H. Gordon and James Levinsohn
Comment: John Whalley
11. The Optimal Taxation of Internationally Mobile Capital in an Efficiency Wage Model
John Douglas Wilson
Comment: Lawrence F. Katz
Author Index
Subject Index

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