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Do Strong Fences Make Strong Neighbors?

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  • Desai, Mihir A.
  • Dharmapala, Dhammika

Abstract

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.

Suggested Citation

  • Desai, Mihir A. & Dharmapala, Dhammika, 2010. "Do Strong Fences Make Strong Neighbors?," National Tax Journal, National Tax Association;National Tax Journal, vol. 63(4), pages 723-740, December.
    • Handle: RePEc:ntj:journl:v:63:y:2010:i:4:p:723-40
    DOI: 10.17310/ntj.2010.4.07
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    References listed on IDEAS

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    1. Vihang Errunza & Ked Hogan & Mao‐Wei Hung, 1999. "Can the Gains from International Diversification Be Achieved without Trading Abroad?," Journal of Finance, American Finance Association, vol. 54(6), pages 2075-2107, December.
    2. Giovannini,Alberto & Mayer,Colin (ed.), 1992. "European Financial Integration," Cambridge Books, Cambridge University Press, number 9780521428903, October.
    3. Harry P. Huizinga & Johannes Voget, 2009. "International Taxation and the Direction and Volume of Cross‐Border M&As," Journal of Finance, American Finance Association, vol. 64(3), pages 1217-1249, June.
    4. Daniel N. Shaviro, 2009. "Planning and Policy Issues Raised by the Structure of the U.S. International Tax Rules," Working Papers 0915, Oxford University Centre for Business Taxation.
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    Cited by:

    1. T. J. Atwood & Christina Lewellen, 2019. "The Complementarity between Tax Avoidance and Manager Diversion: Evidence from Tax Haven Firms," Contemporary Accounting Research, John Wiley & Sons, vol. 36(1), pages 259-294, March.
    2. Christina M. Lewellen, 2023. "Tax haven incorporation and financial reporting transparency," Review of Accounting Studies, Springer, vol. 28(3), pages 1811-1855, September.

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