TY  - JOUR
AU  - Gordon,Roger H.
AU  - Jun,Joosung
TI  - Taxes and the Form of Ownership of Foreign Corporate Equity
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4159
PY  - 1992
Y2  - September 1992
UR  - http://www.nber.org/papers/w4159
L1  - http://www.nber.org/papers/w4159.pdf
N1  - Author contact info:
Roger H. Gordon
Department of Economics 0508
University of California, San Diego
9500 Gilman Drive, Dept. 0508
La Jolla, CA 92093
Tel: 858/534-4828
Fax: 858/534-7040
E-Mail: rogordon@ucsd.edu

Joosung Jun
E-Mail: jjun@nber.org
M1  - published as Roger H. Gordon, Joosung Jun, Joel Slemrod. "Taxes and the Form of Ownership of Foreign Corporate Equity," in Alberto Giovannini, R. Glen Hubbard, and Joel Slemrod, eds., "Studies in International Taxation" University of Chicago Press (1993)

AB  - Investors can achieve international diversification in their portfolios not only through purchasing foreign equity directly but also through investing in domestic firms which then invest abroad. Yet these alternative approaches are taxed very differently. A number of countries have also imposed various forms of capital controls restricting direct purchases of foreign equity. This paper estimates the degree to which these tax and nontax factors have affected the relative use of these two alternative methods of international diversification, using data on investment in the U.S. by investors from each of ten other countries during the period 1980-1989. While the composition of equity flows differs dramatically across countries, taxes do not appear to play an important role in the data in explaining this variation. Part of the explanation appears to be that tax distortions adjust endogenously to avoid large scale portfolio investments abroad. With the increasing integration of capital markets and the easing of capital controls in many countries, we have seen and expect to continue to see reductions in the tax distortions affecting the form of international capital flows.
ER  -