Thursday, August 22, 2013
Thomas J. Brennan
(Northwestern), Where the Money Really Went: A New Understanding of the AJCA Tax Holiday:
International tax policy debate has been informed by a belief based on prior research that, notwithstanding legal prohibitions, shareholder payouts in 2005 accounted for $0.60-$0.92 per dollar repatriated under the AJCA tax holiday. I analyze total payouts that year and prove that this belief is actually false. I use constrained regressions to determine what spending really occurred. Legal restrictions mattered. Twenty firms represented 56% of repatriated cash and spent heterogeneously during 2005-2009, with $0.78 per repatriated dollar going to AJCA-permissible uses, including cash acquisitions ($0.54) and debt reductions ($0.16). Smaller repatriators spent at least $0.61 per dollar on AJCA-permissible uses.
(Hat Tip: Peter Merrill.)