US interest allocation rules: effects and policy
One of the important changes of the 1986 tax reform for U.S. multinationals is related to the allocation of interest expense. Prior to 1986, U.S. companies allocated domestic interest expense to the income of foreign affiliates on a non-consolidated basis according to the distribution of gross incom...
Gespeichert in:
| Hauptverfasser: | , |
|---|---|
| Format: | Buch |
| Sprache: | English |
| Veröffentlicht: |
Cambridge, Mass.
1994
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| Schriftenreihe: | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series
4712 |
| Schlagworte: | |
| Zusammenfassung: | One of the important changes of the 1986 tax reform for U.S. multinationals is related to the allocation of interest expense. Prior to 1986, U.S. companies allocated domestic interest expense to the income of foreign affiliates on a non-consolidated basis according to the distribution of gross income or assets. After 1986, a U.S. multinational is required to allocate domestic interest expense on a consolidated basis according to the distribution of U.S. and foreign assets. We analyze the impact of the new interest allocation rules on the financial and investment decisions of U.S. multinationals using data from a survey of multinationals assembled by Price Waterhouse. We find that the allocation of interest expense increases the marginal cost of U.S. debt by about 38 percent for firms with excess foreign tax credits. Our empirical tests suggest that firms have altered the location of their borrowings in response to the new rules. We also find that the requirement to allocate interest expense has a significant impact on the effective tax rate faced by U.S. multinationals. For U.S. domestic investments, the interest allocation rules increase the U.S. effective rate from 17.6 percent to 21.9 percent. The rules also increase the effective tax rates on foreign investments made by U.S. firms. |
| Beschreibung: | 45 S. |
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| 490 | 1 | |a National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |v 4712 | |
| 520 | |a One of the important changes of the 1986 tax reform for U.S. multinationals is related to the allocation of interest expense. Prior to 1986, U.S. companies allocated domestic interest expense to the income of foreign affiliates on a non-consolidated basis according to the distribution of gross income or assets. After 1986, a U.S. multinational is required to allocate domestic interest expense on a consolidated basis according to the distribution of U.S. and foreign assets. We analyze the impact of the new interest allocation rules on the financial and investment decisions of U.S. multinationals using data from a survey of multinationals assembled by Price Waterhouse. We find that the allocation of interest expense increases the marginal cost of U.S. debt by about 38 percent for firms with excess foreign tax credits. Our empirical tests suggest that firms have altered the location of their borrowings in response to the new rules. We also find that the requirement to allocate interest expense has a significant impact on the effective tax rate faced by U.S. multinationals. For U.S. domestic investments, the interest allocation rules increase the U.S. effective rate from 17.6 percent to 21.9 percent. The rules also increase the effective tax rates on foreign investments made by U.S. firms. | ||
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| 650 | 4 | |a Ökonometrisches Modell | |
| 650 | 4 | |a International business enterprises |x Taxation |z United States |x Econometric models | |
| 650 | 4 | |a Investments, American |x Taxation |x Econometric models | |
| 651 | 4 | |a USA | |
| 700 | 1 | |a Mintz, Jack M. |e Verfasser |4 aut | |
| 830 | 0 | |a National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |v 4712 |w (DE-604)BV002801238 |9 4712 | |
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Prior to 1986, U.S. companies allocated domestic interest expense to the income of foreign affiliates on a non-consolidated basis according to the distribution of gross income or assets. After 1986, a U.S. multinational is required to allocate domestic interest expense on a consolidated basis according to the distribution of U.S. and foreign assets. We analyze the impact of the new interest allocation rules on the financial and investment decisions of U.S. multinationals using data from a survey of multinationals assembled by Price Waterhouse. We find that the allocation of interest expense increases the marginal cost of U.S. debt by about 38 percent for firms with excess foreign tax credits. Our empirical tests suggest that firms have altered the location of their borrowings in response to the new rules. We also find that the requirement to allocate interest expense has a significant impact on the effective tax rate faced by U.S. multinationals. For U.S. domestic investments, the interest allocation rules increase the U.S. effective rate from 17.6 percent to 21.9 percent. 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| geographic | USA |
| geographic_facet | USA |
| id | DE-604.BV009787365 |
| illustrated | Not Illustrated |
| indexdate | 2024-07-09T17:40:51Z |
| institution | BVB |
| language | English |
| oai_aleph_id | oai:aleph.bib-bvb.de:BVB01-006475048 |
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| physical | 45 S. |
| publishDate | 1994 |
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| series | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| series2 | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| spelling | Altshuler, Rosanne Verfasser (DE-588)131401939 aut US interest allocation rules effects and policy Rosanne Altshuler ; Jack Mintz Cambridge, Mass. 1994 45 S. txt rdacontent n rdamedia nc rdacarrier National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 4712 One of the important changes of the 1986 tax reform for U.S. multinationals is related to the allocation of interest expense. Prior to 1986, U.S. companies allocated domestic interest expense to the income of foreign affiliates on a non-consolidated basis according to the distribution of gross income or assets. After 1986, a U.S. multinational is required to allocate domestic interest expense on a consolidated basis according to the distribution of U.S. and foreign assets. We analyze the impact of the new interest allocation rules on the financial and investment decisions of U.S. multinationals using data from a survey of multinationals assembled by Price Waterhouse. We find that the allocation of interest expense increases the marginal cost of U.S. debt by about 38 percent for firms with excess foreign tax credits. Our empirical tests suggest that firms have altered the location of their borrowings in response to the new rules. We also find that the requirement to allocate interest expense has a significant impact on the effective tax rate faced by U.S. multinationals. For U.S. domestic investments, the interest allocation rules increase the U.S. effective rate from 17.6 percent to 21.9 percent. The rules also increase the effective tax rates on foreign investments made by U.S. firms. Multinationales Unternehmen Steuer Ökonometrisches Modell International business enterprises Taxation United States Econometric models Investments, American Taxation Econometric models USA Mintz, Jack M. Verfasser aut National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 4712 (DE-604)BV002801238 4712 |
| spellingShingle | Altshuler, Rosanne Mintz, Jack M. US interest allocation rules effects and policy National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series Multinationales Unternehmen Steuer Ökonometrisches Modell International business enterprises Taxation United States Econometric models Investments, American Taxation Econometric models |
| title | US interest allocation rules effects and policy |
| title_auth | US interest allocation rules effects and policy |
| title_exact_search | US interest allocation rules effects and policy |
| title_full | US interest allocation rules effects and policy Rosanne Altshuler ; Jack Mintz |
| title_fullStr | US interest allocation rules effects and policy Rosanne Altshuler ; Jack Mintz |
| title_full_unstemmed | US interest allocation rules effects and policy Rosanne Altshuler ; Jack Mintz |
| title_short | US interest allocation rules |
| title_sort | us interest allocation rules effects and policy |
| title_sub | effects and policy |
| topic | Multinationales Unternehmen Steuer Ökonometrisches Modell International business enterprises Taxation United States Econometric models Investments, American Taxation Econometric models |
| topic_facet | Multinationales Unternehmen Steuer Ökonometrisches Modell International business enterprises Taxation United States Econometric models Investments, American Taxation Econometric models USA |
| volume_link | (DE-604)BV002801238 |
| work_keys_str_mv | AT altshulerrosanne usinterestallocationruleseffectsandpolicy AT mintzjackm usinterestallocationruleseffectsandpolicy |