March 13, 2008
Senate Finance on Taxing Sovereign Wealth
Posted by Victor Fleischer

The Senate Finance Committee is interested in taxing sovereign wealth funds.  Or at least they want to learn more:  Baucus and Grassley have asked the Joint Committee on Taxation to write a report. 

Meanwhile, on the non-tax front, Gilson & Milhaupt have posted Sovereign Wealth Funds and Corporate Governance: A Minimalist Response to New Mercantilism.  They suggest suspending the voting rights of SWF equity investments (the voting rights would return when sold to a private investor).  Seems very sensible, and a good start, although I'm not sure that it's sufficient to fully address the concern.  If you are a 10% owner of a publicly traded corporation, I'm not sure you need voting rights or a board seat to have influence over corporate policy.  Still, Gilson & Milhaupt's proposal seems like a sensible place to start the corporate governance discussion.  See also Paul Rose, Sovereigns as Shareholders.  Paul prefers the best practices / code of conduct approach.

I hope to post my own tax-focused paper in a couple of weeks.  Stay tuned ...

Prior posts: 

Current Law on Taxing Sovereign Wealth Funds: Why It's Good to Be the King (March 5, 2008)
Taxing Sovereign Wealth Funds (March 4, 2008)

Related Research:

Two and Twenty (forthcoming NYU L Rev)
Taxing Blackstone
(forthcoming Tax L Rev)

Press Coverage:

AP / SF Chronicle (March 7, 2008)
Financial Week
(March 5, 2008)
NYT Deal Book
(March 5, 2008)
Dealbreaker
(March 4, 2008)

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Comments (1)

1. Posted by Jake on March 13, 2008 @ 21:09 | Permalink

Just as an initial gut reaction, the Gilson/Milhaupt proposal would appear to overvalue shareholder voting rights and, concomitantly, the regulatory impact of limiting such rights when stock of publicly traded US companies is held by SWFs.

Trying to figure out which is the greater of two evils here is the challenge. Is it ownership of US company stocks by foreign sovereigns via SWFs? Or is it roadblocks to stock ownership by SWFs (or whoever else may be the villain of the day) thrown up by our own Congress?

I vote for open markets and free trade.

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