Borderline Case

The growing integration of world markets for capital and goods, coupled with the rise of instantaneous worldwide communication, has made identification of corporations as "American," "Dutch," or "Japanese" extremely difficult. Yet tax treatment does depend of where a firm is chartered. And, as Borderline Case documents, there is little doubt that tax rules for firms doing business in several nationsfirms that account for more than three-quarters of corporate R&D spending in the United Stateshave substantial effects on corporate decisionmaking and, ultimately, U.S. competitiveness. This book explores the impact of the U.S. tax code and its incentives on the international activities of U.S.- and foreign-based firms: basic research outlays, expenditures on product and process development, and plant and equipment investment. The authors include industry experts from large multinational firms in technology and pharmaceuticals, academic researchers who have explored the quantitative impact of tax provisions on R&D, and tax policy analysts who have examined international tax rules in the broader context of tax reform. These experts look at how corporate investment and R&D are shaped by specific tax provisions, such as the definition of taxable income, relative tax burdens on domestic and foreign business, taxation of earnings repatriated to the United States, deductibility of expenses of worldwide operations, and U.S. corporate taxes relative to other countries. The volume explores prescriptions and prospects for tax reform and reviews major reform proposals and their implications for the behavior of multinational business. Table of Contents FRONT MATTER INTRODUCTION I International Tax Policy and Technology Investments 1 THE TAXATION OF FOREIGN DIRECT INVESTMENT: OPERATIONAL AND POLICY PERSPECTIVES 2 INTERNATIONAL TAXATION AND CORPORATION R&D: EVIDENCE AND IMPLICATIONS 3 R&D TAX INCENTIVES AND MANUFACTURING-SECTOR R&D EXPENDITURES 4 INTERNATIONAL TAX POLICY, INVESTMENT, AND TECHNOLOGY II Industry Perspectives on the Impact of International Tax Rules 5 IMPACT OF TAX INCENTIVES ON THE LOCATION OF INVESTMENT: A CORPORATE PERSPECTIVE 6 THE VIRTUAL GLOBAL ELECTRONIC ECONOMY 7 OPERATING THROUGH JOINT VENTURES UNDER U.S. INTERNATIONAL TAX RULES: GLOBAL COMPETITION FOR R&D INVESTMENTS III Tax Reform: Prescriptions and Prospects 8 INTERNATIONAL TAX AND COMPETITIVENESS ASPECTS OF INTERNATIONAL TAX REFORM 9 U.S. TAX POLICY AND MULTINATIONAL CORPORATIONS: INCENTIVES, PROBLEMS, AND DIRECTIONS FOR REFORM 10 DIRECTIONS FOR INTERNATIONAL TAX REFORM 11 TAX REFORM: PRESCRIPTIONS AND PROSPECTS GLOSSARY INDEX