Repatriation taxes, repatriation strategies and multinational financial policy

Several investment-repatriation strategies are added to the standard model of a multinational in which an affiliate is located in a low-tax country and is limited to two alternatives: repatriating taxable dividends to the parent or investing in its own real operations. In our model, affiliates can i...

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Bibliographic Details
Published in:Journal of public economics 2003, Vol.87 (1), p.73-107
Main Authors: Altshuler, Rosanne, Grubert, Harry
Format: Article
Language:English
Subjects:
Dividend repatriation
Economics
Financial policy
International taxation
Investment policy
Multinational
Multinational enterprises
Public economics
Taxation
U.S.A
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Summary:Several investment-repatriation strategies are added to the standard model of a multinational in which an affiliate is located in a low-tax country and is limited to two alternatives: repatriating taxable dividends to the parent or investing in its own real operations. In our model, affiliates can invest in passive assets, which the parent can borrow against, or in related affiliates which can be used as vehicles for tax-favored repatriations. We show analytically how the availability of alternative strategies can effect real investment throughout the worldwide corporation. We use firm level data for US multinationals to test for the importance of alternative strategies. The evidence is generally consistent with the theory, particularly the strategies using related affiliates.
ISSN:0047-2727
1879-2316
DOI:10.1016/S0047-2727(01)00173-6