The Exempt Portfolio Interest Sections of the Internal Revenue Code and the Underlying Cause of Their Existence
| Autor | Ignacio J. Labarca Morales |
| Cargo | J.D. Candidate, University of Puerto Rico Law School, 2012 |
| Páginas | 314-322 |
THE EXEMPT PORTFOLIO INTEREST SECTIONS OF THE
INTERNAL REVENUE CODE AND THE UNDER LYING CAUSE OF
THEIR EXISTENCE
NOTE
IGNACIO J. LABARCA MORALES*
I. Introductory framework .............................................................................................. 314
II. Inbound Taxation Outline .......................................................................................... 314
III. The exempt portfolio interest ................................................................................. 316
IV. Reasoning and analysis of the portfolio interest tax exemption ............... 317
I. INTRODUCTORY FRAMEWORK
The United States Taxation regime, on Inbound Taxation of foreign
investors, has for the past few decades been concerned with two major focal
points. These two main concerns pertain to the ascending collection of tax
revenues1 and the introduction of foreign capital, in reference to fiscal and
economic aspects.
In order to develop the principal subject of this article, it is important
to highlight and explain the nature of these two subjects, since it’s precisely
their conflicting nature what gives birth to the carefully crafted provisions of
U.S. taxation framework regarding foreign investment. This paper will
analyze how exactly these provisions are benefiting the U.S. taxation system
and also stimulating foreign investment. All of this will be depicted in light of
the tradeoff between inflation and unemployment rates that characterizes
the monetary and fiscal policy concerns illustrated in the Philips’ Curve.
We will also analyze the pros and cons of these provisions to both the
U.S. tax regime and to foreign investors, applying close scrutiny to the
general provisions as well as their practical effects on foreign investments.
II. INBOUND TAXATION OUTLINE
The U.S. Taxation regime is regulated by the Internal Revenues Code.
In order to develop this article we need to directly compare and balance the
ascending collection of tax revenue, as well as the introduction of foreign
* J.D. Candidate, University of Puerto Rico La w School, 2012.
1 JOSEPH ISENBERGH, INTERNAT IONAL TAXATION 81-97 (3rd ed., Foundation Press 2010).
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