Article | National Tax Journal

Do Strong Fences Make Strong Neighbors?

by Mihir Desai and Dhammika Dharmapala


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.

Keywords: Policy; Taxation; Multinational Firms and Management; Globalized Markets and Industries; Governance Controls; Interests; Opportunities; System; United States;


Desai, Mihir, and Dhammika Dharmapala. "Do Strong Fences Make Strong Neighbors?" National Tax Journal 63, no. 4 (December 2010): 723–740.