Do Strong Fences Make Strong Neighbors?
Mihir A. Desai
Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)
University of Chicago Law School
June 1, 2010
Illinois Public Law Research Paper No. 10-22
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
Date posted: August 1, 2010 ; Last revised: March 13, 2011