The Effect of Taxes on Investment and Income Shifting to Puerto Rico

Harry Grubert and Joel Slemrod

No 4869, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The income of Puerto Rican affiliates of U.S. corporations is essentially untaxed by either Puerto Rico or the U.S. This lowers the tax penalty on real investment there, and also makes it attractive to shift reported taxable income from the U.S. parent corporation to the Puerto Rican affiliate. Because the ability to shift income is affected by the presence of real operations, the true marginal effective tax rate on investment in Puerto Rico depends on the income shifting opportunities.

JEL-codes: F21 H25 (search for similar items in EconPapers)
Date: 1994-09
Note: ITI PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published as Review of Economics and Statistics, Vol. 80, no. 3 (August 1998): 365-373.

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Journal Article: The Effect Of Taxes On Investment And Income Shifting To Puerto Rico (1998)
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