Taxing the Bandit Kings
Yale Law Journal Pocket Part, Vol. 118, 2008
9 Pages Posted: 10 Sep 2008 Last revised: 15 Jan 2009
Date Written: September 8, 2008
The rise of significant inbound capital flows originating from sovereign wealth funds (SWFs) has occasioned a debate over the appropriate regulatory and tax treatment of these funds. In particular, it has been argued that the tax exemption currently enjoyed by SWFs confers an advantage on these entities as providers of capital to U.S. firms relative to private foreign investors, and that a tax should be imposed on SWFs to restore fairness. This brief essay argues that the distinctive nature of the portfolio choices facing SWFs negates this fairness argument. Indeed, changing the tax treatment of SWFs as has been proposed would distort choices that are otherwise efficient and would handicap U.S. firms and workers.
Keywords: sovereign wealth funds, sovereign immunity, taxes, foreign portfolio investment
JEL Classification: F21, F23, G30, H25
Suggested Citation: Suggested Citation