Paul L. Caron

Tuesday, November 30, 2021

Avi-Yonah: A Different Way to Tax Stock Buybacks

Reuven Avi-Yonah (Michigan), A Different Way to Tax Stock Buybacks, 173 Tax Notes Fed. 1107 (Nov. 22, 2021):

Tax Notes Federal (2020)In this article, Avi-Yonah reviews the Build Back Better Act, which would impose a 1 percent excise tax on corporate stock buybacks. He argues that while the measure is an effective way to raise revenue from high-income taxpayers, it will not address the main tax problem with buybacks: the tax exemption for foreign shareholders, which Congress should reconsider.

The Build Back Better Act is a good way to raise revenue from high-wealth individuals, so it should be applauded. But its proposed rate is too low to deter buybacks, which raise tax evasion concerns for foreigners and for Americans pretending to be foreigners. Therefore, the IRC should be amended to treat buybacks from foreign shareholders as dividends subject to withholding tax.

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