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Reconsidering International Tax Neutrality, Michael S. Knoll

All Faculty Scholarship

For decades, U.S. international tax policy has shifted back and forth between territorial-source-exemption taxation and worldwide-residence-credit taxation. The former is generally associated with capital import neutrality (CIN) and the latter with capital export neutrality (CEN). One reason why national tax policy has shifted back and forth between those benchmarks is because it is widely accepted that a tax system cannot simultaneously satisfy both CEN and CIN unless tax rates on capital are harmonized across jurisdictions. In this essay, I argue that the international tax literature contains two different and conflicting definitions for CIN. Under one definition, which goes back at …