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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

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Date posted: August 19, 2013 ; Last revised: April 21, 2014

Suggested Citation

Brennan, Thomas J., Where the Money Really Went: A New Understanding of the AJCA Tax Holiday (March 6, 2014). Northwestern Law & Econ Research Paper No. 13-35. Available at SSRN: https://ssrn.com/abstract=2312721 or http://dx.doi.org/10.2139/ssrn.2312721

Contact Information

Thomas J. Brennan (Contact Author)
Harvard Law School ( email )
1557 Massachusetts Ave
6 Ever
Cambridge, MA 02138
United States
617-495-3141 (Phone)
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