International Differences in Capital Taxation and Corporate Borrowing Behavior: Evidence from the U.S. Withholding Tax / Leslie E. Papke.

By:

Papke, Leslie E

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w3129.Publication details: Cambridge, Mass. National Bureau of Economic Research 1989.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Securities transactions in the U.S. climbed on a net basis from $19 billion in 1983 to $50 billion in 1985. This rise was due almost entirely to an increase in foreign purchases of U.S. securities - largely corporate and government bonds. One reason suggested for this phenomenon is foreign investors' perception that the U.S. is a safe haven: there are strong investment fundamentals in the U.S. relative to other industrialized countries. Moreover, since the summer of 1984, these instruments have been free from withholding tax on interest paid to foreign holders of notes and bonds issued by U.S. entities. Recently, there has been discussion of re-imposing the withholding tax. A common counter argument to re-imposition is that such a tax is notoriously ineffective at raising revenue. As evidence, opponents point to the U.S. experience with the now-repealed withholding tax on the interest earned by foreigners. This paper explains the reasons that the tax was ineffectual. It is essentially a case study of the earlier U.S. experience with a withholding tax. In particular, the paper focuses on corporate borrowing behavior during the tenure of the tax and the change which took place after repeal.

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Holdings
Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w3129 (Browse shelf(Opens below))	Not For Loan

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September 1989.

Securities transactions in the U.S. climbed on a net basis from $19 billion in 1983 to $50 billion in 1985. This rise was due almost entirely to an increase in foreign purchases of U.S. securities - largely corporate and government bonds. One reason suggested for this phenomenon is foreign investors' perception that the U.S. is a safe haven: there are strong investment fundamentals in the U.S. relative to other industrialized countries. Moreover, since the summer of 1984, these instruments have been free from withholding tax on interest paid to foreign holders of notes and bonds issued by U.S. entities. Recently, there has been discussion of re-imposing the withholding tax. A common counter argument to re-imposition is that such a tax is notoriously ineffective at raising revenue. As evidence, opponents point to the U.S. experience with the now-repealed withholding tax on the interest earned by foreigners. This paper explains the reasons that the tax was ineffectual. It is essentially a case study of the earlier U.S. experience with a withholding tax. In particular, the paper focuses on corporate borrowing behavior during the tenure of the tax and the change which took place after repeal.