Taxed Avoidance: American Participation in Unsanctioned International Boycotts

37 Pages Posted: 3 Mar 1998 Last revised: 6 Oct 2010

Date Written: July 1997

Abstract

American firms are subject to tax and civil penalties for participating in international boycotts (other than those sanctioned by the U.S. government). These penalties apply primarily to American companies that cooperate with the Arab League's boycott of Israel. The effectiveness of U.S. antiboycott legislation is reflected in the fact that American firms comply with only 30 percent of the 10,000 boycott requests they receive annually. The cross-sectional pattern is informative: the U.S. tax penalty for boycott participation is an increasing function of foreign tax rates, and reported compliance rates vary inversely with tax rates. Tax rate differences of 10 percent are associated with 6 percent differences in rates of compliance with boycott requests. This evidence suggests that U.S. anti-boycott legislation significantly reduces the willingness of American firms to participate in the boycott of Israel, reducing boycott participation rates by as much as 15-30 percent.

Suggested Citation

Hines, James Rodger, Taxed Avoidance: American Participation in Unsanctioned International Boycotts (July 1997). NBER Working Paper No. w6116. Available at SSRN: https://ssrn.com/abstract=49058

James Rodger Hines (Contact Author)

University of Michigan ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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