Coming Home to America: Dividend Repatriations by U.S. Multinationals

James Hines and Robert Hubbard

No 2931, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper analyzes the financial flows from foreign subsidiaries of American multinational corporations to their parent corporations in the U.S. These repatriations are important not only to U.S. investors, who thereby have access to those funds, but also to the U.S. government, which generally does not tax foreign earnings of controlled foreign corporations until they are repatriated. The paper reviews the current tax system as applied to multinational firms, and considers the incentives it creates for various intra-firm financial transactions (in particular, the form of repatriations). These incentives appear to be inconsistent with historical repatriation patterns from aggregate time-series data on the overseas operations of U.S. multinationals. To resolve this inconsistency, we explore the determinants of distributions by foreign subsidiaries to their U.S. parent corporations, using new micro data on 12,041 controlled foreign corporations (and their 453 U.S. parents) collected from tax returns for 1984. This source exposes variations in distribution patterns not detectable in aggregate data. In particular, the data suggest that most subsidiaries paid no dividends to their parents in 1984, and that the U.S. government collected very little revenue on their foreign income while distorting their internal financial transactions.

Date: 1989-04
Note: PE
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Published as Taxation in the Global Economy, edited by Assaf Razin and Joel Slemrod, pp. 161-200. Chicago: The University of Chicago Press, 1990.
Published as Coming Home to America: Dividend Repatriations by US Multinationals , James R. Hines, Jr., R. Glenn Hubbard. in Taxation in the Global Economy , Razin and Slemrod. 1990

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Related works:
Chapter: Coming Home to America: Dividend Repatriations by US Multinationals (1990)
Working Paper: COMING HOME TO AMERICA - DEVIDEND REPATRIATIONS BY U.S. MULTINATIONALS (1989)
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