PSU ACCTG 550 - Systems Of Tax type set (11 pages)

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Systems Of Tax type set



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Systems Of Tax type set

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Lecture Notes


Pages:
11
School:
Pennsylvania State University
Course:
Acctg 550 - Taxation and Management Decisions

Unformatted text preview:

Smeal College of Business Pennsylvania State University Taxation and Management Decisions ACCTG 550 Professor Huddart Systems of Taxation1 In thinking about the taxation of activities that span national borders it is necessary to consider multiple levels of taxation that apply as a dollar of pro t makes its way from the foreign enterprise to a domestic enterprise and nally into the hands of individual shareholders This note classi es taxation schemes around the world according to the manner in which pro ts and dividends are taxed en route to shareholders 1 Classi cation of International Tax Regimes The taxation of pro ts earned abroad is handled in several distinct ways At the most abstract level the total tax paid depends on whether the home country adopts a worldwide or territorial perspective and whether and how the home country computes a dividend tax credit for individual shareholders who receive dividends from domestic corporations Countries can be broadly classi ed on these two criteria as shown in the table below Territorial Worldwide Full Imputation France Germany United Kingdom Partial imputation Canada Japan No Imputation United States The taxation of a foreign subsidiary s earnings by the country in which the subsidiary s parent is located depends upon i whether the home country adopts a territorial or worldwide system of taxation and ii the nature of the imputation regime that applies on corporate distributions to individual shareholders Under a territorial system the repatriation is not taxed by 1 This material is drawn principally from Jennifer Babcock 1996 The Impact of Imputation Systems of Taxation on Cross Jurisdictional Income Shifting Working paper Duke University and Richard Sansing 1996 Foreign investment decisions in the presence of real options Working paper Yale School of Organization and Management c Steven Huddart 1995 2005 All rights reserved www smeal psu edu faculty huddart ACCTG 550 Multinational Tax Shareholder Parent Corp Home



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