Document Type

Article

Publication Date

8-2025

Abstract

Posing the question of international tax cooperation versus competition reminds me of multiple-choice exams in which the right answer is “all of the above.” National interests determine which dominates at any given time. And in tax competition among nations, zero is not a lower bound.

In 1918, to encourage U.S. investments abroad, the United States enacted a credit for foreign taxes paid by U.S. companies and relinquished taxing rights to most foreign-source income. With the foreign tax credit, the United States assumed sole responsibility for reducing the double taxation of its residents and citizens. As the influential economist Edwin Seligman observed, “The United States is making a present of the revenue to other countries.” Over time, other countries reciprocated with their own credits or exemptions for active business income earned by subsidiaries abroad. Today, the question remains: Is the early 20th-century generosity of the FTC appropriate for the 21st century? Do we need to reassess just how generous our FTC rules should be — especially for mobile income taxed at a low rate abroad, such as with a patent box? I will return to this question later.

Disciplines

Law | Taxation-Transnational | Tax Law

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