Simplifying international tax rules will not solve all the challenges that stand in the way of healthy cross-border investment, but eliminating unnecessary provisions would be a positive pivot relative to the trajectory of recent years. It’s high time that policymakers stopped pursuing ever more complex rules and started the hard work of simplification.
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The National Foreign Trade Council’s survey shows that the private sector recognizes the economic value of treaties as an instrument to increase tax certainty and decrease distortions.
Sound tax policy should be based on the principles of simplicity, stability, transparency, and neutrality.
Academic research indicates foreign direct investment (FDI) is highly responsive to the corporate effective tax rate (ETRs); that is, the tax rate after accounting for all deduction and credits available to corporations.
Overall, the data shows outbound FDI shifted from low-tax to other jurisdictions, while inbound FDI remained largely unchanged.
Contrary to the Biden administration’s claims, raising taxes on cross-border investment would hurt U.S. economic growth and jobs. Research shows that FDI creates jobs in the U.S. and raises workers’ wages and productivity.