A New International Tax Benchmark

Taxation of Foreign Income by the U.S. and Other GovernmentsJames R. Hines Jr.University of Michigan and UC-BerkeleyFebruary 20091zzz{z{{American Taxation of Foreign Income.The U.S. practice of taxing foreign business income is unusual – in almost every respect – in the world today.The United States taxes corporate income at very high rates compared to other countries.The United States taxes active foreign business income, which isbecoming a rarity.The United States tightly restricts the ability of American firms to continue to defer U.S. taxation of unrepatriated foreign income.The U.S. limits the extent to which firms with foreign income can effectively deduct general expenses incurred in the U.S.As a result, the U.S. system imposes significant tax burdens on the foreign business activity of U.S. companies.These tax burdens, since they are unusual, impact the competitive positions of U.S. companies.2{{American Business Taxation.The first notable attribute of U.S. business taxation is that the combined U.S. statutory corporate tax rate (35% federal, plus state taxes) is high by world standards.It was not always the case that the U.S. tax rate was so much higher than those of most other countries, but over the past 20 years foreign tax rates have fallen as the U.S. statutory tax rate has remained steady.3OECD Country 2008 corporate tax rateAustralia 30.00Austria 25.00Belgium33.99Canada 33.50Czech Republic 21.00Denmark 25 ...