Where the Money Really Went: A New Understanding of the AJCA Tax Holiday
Thomas J. Brennan
Harvard Law School
March 6, 2014
Northwestern Law & Econ Research Paper No. 13-35
International tax policy debate has been informed by a belief based on prior research that, notwithstanding legal prohibitions, shareholder payouts in 2005 accounted for $0.60-$0.92 per dollar repatriated under the AJCA tax holiday. I analyze total payouts that year and prove that this is false. Additionally, I estimate actual spending changes using firm-by-firm constrained regressions over a 5-year post-holiday window. Top-20 repatriators (56% of all repatriated cash) spent heterogeneously, with $0.72 per repatriated dollar associated with AJCA-permissible uses, including cash acquisitions ($0.49), debt reductions ($0.10), and R&D ($0.09). For smaller repatriators, $0.59 per dollar was associated with permissible uses.
Number of Pages in PDF File: 54
Keywords: international tax, tax policy, repatriation, dividends, shareholder payouts, acquisitions, spending behavior
JEL Classification: F23, G30, H25, H32, K34
Date posted: August 19, 2013 ; Last revised: April 21, 2014
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