International Tax and Public Finance

, Volume 10, Issue 4, pp 469–487

Taxing Multinationals

  • Michael P. Devereux
  • R. Glenn Hubbard

DOI: 10.1023/A:1024691600605

Cite this article as:
Devereux, M.P. & Hubbard, R.G. International Tax and Public Finance (2003) 10: 469. doi:10.1023/A:1024691600605


This paper analyzes the effects of tax policy on the strategic choices of multinationals and on national welfare. Contrary to existing theory, in the absence of foreign taxation, deferral of home-country taxation until earnings on outbound FDI are repatriated is generally superior to including those earnings in current income. This holds even if the home country taxes domestic investment less generously. This is also generally superior to exempting foreign income. Foreign taxes permit foreign governments to capture some of the pre-tax economic rent from the home-country FDI; this reduces the benefit to the home country of more generous taxation of outbound FDI.

foreign direct investmentmultinationalscorporation tax

Copyright information

© Kluwer Academic Publishers 2003

Authors and Affiliations

  • Michael P. Devereux
    • 1
  • R. Glenn Hubbard
    • 2
  1. 1.Department of EconomicsWarwick UniversityCoventryUnited Kingdom
  2. 2.Graduate School of BusinessColumbia UniversityBroadway, New YorkUSA