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• Article | National Tax Journal | December, 2011

  Tax Policy and the Efficiency of U.S. Direct Investment Abroad

  Mihir A. Desai, C. Fritz Foley and James R. Hines Jr.

  Deferral of U.S. taxes on foreign source income is commonly characterized as a subsidy to foreign investment, as reflected in its inclusion among "tax expenditures" and occasional calls for its repeal. This paper analyzes the extent to which tax deferral and other policies inefficiently subsidize U.S. direct investment abroad. Investments are dynamically inefficient if they consistently generate fewer returns to investors than they absorb in new investment funds. From 1982 to 2010, repatriated earnings from foreign affiliates exceeded net capital investments by $1.1 trillion in 2010 dollars; and from 1950 to 2010, repatriated earnings and net interest from foreign affiliates exceeded net equity investments and loans by $2.1 trillion in 2010 dollars. By either measure, cash flows received from abroad exceeded 160% of net investments, implying that foreign investment over these periods was dynamically efficient.

  Keywords: Policy; Taxation; Performance Efficiency; Foreign Direct Investment; Investment Funds; Investment Return; Business Earnings; Equity; Financing and Loans; Cash Flow; Capital; United States;

  Citation:

  Desai, Mihir A., C. Fritz Foley, and James R. Hines Jr. "Tax Policy and the Efficiency of U.S. Direct Investment Abroad." National Tax Journal 64 (December, 2011): 1055–1082.

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• Article | Harvard Business Review | July–August 2012

  A Better Way to Tax U.S. Businesses

  Mihir Desai

  The article argues that U.S. taxation reform should reduce corporate taxes, incorporate an awareness of the global marketplace, and generate revenue-neutral incentives for innovation. According to the article, a reduction in corporate tax rates would be offset by a tax on noncorporate business income and an expansion of taxable income. Topics include tax-avoidance techniques, globalization, repatriation taxes, corporate social responsibility, and U.S. workers. Graphs are included, which compare the U.S. tax rate with other countries.

  Citation:

  Desai, Mihir. "A Better Way to Tax U.S. Businesses." Harvard Business Review 90, nos. 7-8 (July–August 2012): 135–139.

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• Background Note | HBS Case Collection | 2012

  Note on Financing Growth in Family Firms

  Belen Villalonga

  Keywords: Business Growth and Maturation; Family Business; Private Equity; Joint Ventures; Initial Public Offering;

  Citation:

  Villalonga, Belen. "Note on Financing Growth in Family Firms." Harvard Business School Background Note 212-121, June 2012.

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