{ "id": "RL32587", "type": "CRS Report", "typeId": "REPORTS", "number": "RL32587", "active": false, "source": "EveryCRSReport.com, University of North Texas Libraries Government Documents Department", "versions": [ { "source": "EveryCRSReport.com", "id": 343187, "date": "2009-01-30", "retrieved": "2016-04-07T02:49:02.914001", "title": "Taxes and Offshore Outsourcing", "summary": "The impact of taxes on international trade and investment has been debated for decades. Most recently, a variety of bills addressing international taxation were introduced in the 110th Congress\u2014some would have cut taxes for U.S. firms overseas, while others would have increased taxes on foreign investment. The debate over taxes and foreign outsourcing has tended to grow more heated during times of domestic economic weakness and high unemployment; questions arise over whether taxes contribute to such weakness by discouraging exports (or encouraging imports) or by encouraging U.S. firms to move abroad. The debate over international taxation has again become prominent as a part of the wider debate over \u201coutsourcing.\u201d With taxes, the debate asks how the current system affects outsourcing, and whether policies designed to limit the phenomenon might be desirable.\nThe precise meaning of the term \u201coutsourcing\u201d varies, depending on the context. In one usage, outsourcing simply refers to the use by domestic firms of inputs produced by other firms. Other usages, however, refer exclusively to the international sector. The analysis in this report focuses on two types of such \u201coffshore\u201d outsourcing: the use by domestic firms of imported foreign inputs, including both the use of foreign technical services and the use of foreign-made goods; and the shifting by U.S. firms of domestic operations abroad. The analysis of the first of these types of outsourcing focuses primarily on how taxes affect trade while investment is held constant. The assessment of the second type looks at how taxes affect investment.\nTaxes probably have little impact on the balance of trade (what might be termed \u201cnet\u201d outsourcing), apart from indirect effects that may result from their impact on investment flows. In the language of the outsourcing debate, taxes likely do not change the extent to which the economy as a whole engages in the use of foreign, rather than domestic, inputs (compared to the extent the economy exports). In contrast, taxes can affect the flow of direct investment abroad\u2014that is, the establishment of overseas production facilities by U.S. firms. Thus, if outsourcing is taken to mean the use by U.S. firms of foreign rather than domestic labor, taxes can have an impact. The current U.S. system, however, produces a variety of incentives, disincentives, and neutrality towards overseas investment, and the net impact of the system on the flow of investment is not clear. Similarly, the likely impact of recently enacted legislation is not clear.\nEconomic theory provides frameworks for evaluating the efficiency effect of taxes on international trade and investment, and their subsequent impact on economic welfare. According to theory, taxes best promote economic efficiency\u2014and thus best promote economic welfare\u2014when they do not distort the level or composition of trade or alter the allocation of investment between foreign and domestic uses. In short, taxes best promote economic efficiency and aggregate economic welfare when they do not distort the level of outsourcing, in the sense it is used in this report. With respect to employment, outsourcing may cause sector-specific and near-term job losses but likely does not have a substantial long-run impact on overall employment. This report will be updated only when major legislative developments occur.", "type": "CRS Report", "typeId": "REPORTS", "active": false, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "http://www.crs.gov/Reports/RL32587", "sha1": "16e4fe2c22715c26a7c9a038ec95da97e4f0ff42", "filename": "files/20090130_RL32587_16e4fe2c22715c26a7c9a038ec95da97e4f0ff42.html", "images": null }, { "format": "PDF", "encoding": null, "url": "http://www.crs.gov/Reports/pdf/RL32587", "sha1": "675439d7f8b7e30ff1e9d6df982ccf8797cda86f", "filename": "files/20090130_RL32587_675439d7f8b7e30ff1e9d6df982ccf8797cda86f.pdf", "images": null } ], "topics": [] }, { "source": "University of North Texas Libraries Government Documents Department", "sourceLink": "https://digital.library.unt.edu/ark:/67531/metadc822650/", "id": "RL32587_2008Mar11", "date": "2008-03-11", "retrieved": "2016-03-19T13:57:26", "title": "Taxes and Offshore Outsourcing", "summary": "This report discusses the impact of taxes on international trade and investment has been debated for decades. Most recently, a variety of bills addressing international taxation have been introduced in the 110th Congress\u2014some would cut taxes for U.S. firms overseas, while others would increase taxes on foreign investment. The debate over taxes and foreign outsourcing has tended to grow more heated during times of domestic economic weakness and high unemployment; questions arise over whether taxes contribute to such weakness by discouraging exports (or encouraging imports) or by encouraging U.S. firms to move abroad. The debate over international taxation has again become prominent as a part of the wider debate over \u201coutsourcing.\u201d With taxes, the debate asks how the current system affects outsourcing, and whether policies designed to limit the phenomenon might be desirable.", "type": "CRS Report", "typeId": "REPORT", "active": false, "formats": [ { "format": "PDF", "filename": "files/20080311_RL32587_51b2fe7721b8b7711b76f77c883fe2cc18fb3702.pdf" }, { "format": "HTML", "filename": "files/20080311_RL32587_51b2fe7721b8b7711b76f77c883fe2cc18fb3702.html" } ], "topics": [ { "source": "LIV", "id": "Taxation", "name": "Taxation" }, { "source": "LIV", "id": "International trade", "name": "International trade" }, { "source": "LIV", "id": "Tax policy", "name": "Tax policy" } ] }, { "source": "University of North Texas Libraries Government Documents Department", "sourceLink": "https://digital.library.unt.edu/ark:/67531/metadc808948/", "id": "RL32587_2004Dec15", "date": "2004-12-15", "retrieved": "2016-03-19T13:57:26", "title": "Taxes and Offshore Outsourcing", "summary": "The impact of taxes on international trade and foreign investment has had a place in tax policy debates for decades, although its prominence has waxed and waned. The debate has tended to grow more heated during times of domestic economic weakness and high unemployment ; questions arise during such times over whether taxes contribute to such weakness by discouraging exports (or encouraging\r\nimports) or by encouraging U.S. firms to move abroad. In recent months, the debate over international taxation again became prominent as a part of the wider debate over \u201coutsourcing.\u201d With taxes, the debate asks how the current tax system likely affects outsourcing, and whether alternative tax policies designed to limit the phenomenon might be desirable. This report applies economic analysis to both questions.", "type": "CRS Report", "typeId": "REPORT", "active": false, "formats": [ { "format": "PDF", "filename": "files/20041215_RL32587_fc7a71d8ab7d366f84f05761b38c19224685800f.pdf" }, { "format": "HTML", "filename": "files/20041215_RL32587_fc7a71d8ab7d366f84f05761b38c19224685800f.html" } ], "topics": [ { "source": "LIV", "id": "Taxation", "name": "Taxation" }, { "source": "LIV", "id": "International trade", "name": "International trade" }, { "source": "LIV", "id": "Tax policy", "name": "Tax policy" } ] } ], "topics": [ "Economic Policy" ] }