Do Strong Fences Make Strong Neighbors?

Abstract:     
Many features of U.S. tax policy towards multinational firms – including the governing principle of capital export neutrality, the byzantine system of expense allocation, and anti-inversion legislation – reflect the intuition that building “strong fences” around the United States advances American interests. This paper examines the interaction of a strong fences policy with the increasingly important global markets for corporate residence, corporate control and corporate equities. These markets provide opportunities for entrepreneurs, managers and investors to circumvent a strong fences policy. The paper provides simple descriptive evidence of the growing importance of these markets and considers the implications for U.S. tax policy.

Number of Pages in PDF File: 27

Keywords: International Taxation, Initial Public Offerings, Mergers and Acquisitions, Foreign Direct Investment, Foreign Portfolio Investment

JEL Classification: H25

working papers series