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less appealing. By increasing the price of the security, investors will buy fewer of them, all else equal. With fewer domestic investors purchasing foreign securities, capital outflows will be lower, thereby reducing the balance-of-payments deficit. The equation for the balance of payments is:
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92:
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Foreign securities that would endanger international monetary stability. The
President will determine if any foreign securities qualify for this exemption. Canadian-issued securities were the only initial exemption from the tax in
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The interest equalization tax "brought
American investment activity in foreign markets to a virtual standstill." However, financial markets responded over time with massive evasion of the tax, along with the development of the
156:{\displaystyle {\begin{aligned}{\mbox{Capital account}}&={\mbox{Change in foreign ownership of domestic assets}}\\&-{\mbox{Change in domestic ownership of foreign assets}}\\\end{aligned}}}
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The tax was effective on purchases made after July 18, 1963. It was scheduled to expire on
January 1, 1966, but was extended multiple times, and eventually abolished on January, 1974.
50:
401:
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Since many factors influence the balance-of-payments account, the effect of the tax is unclear. However, there was a positive trend in the years after it was enacted.
39:
The purpose of the tax was to decrease the balance of payments deficit in the US. This was achieved conceptually by making investments in foreign
260:
As the original intent of the
Interest Equalization Tax was the reduce the balance-of-payments deficit, a majority consider the tax successful.
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Investment banks that underwrite foreign securities are exempt from the tax when they acquire and resell such securities from the corporation
166:
So when capital outflows decrease, the capital account increases. When the capital account increases, the balance-of-payments increases.
23:
in July 1963. It was meant to make it less profitable for U.S. investors to invest abroad by taxing the purchase of foreign
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Debt obligations that were issued to a U.S. person in order for that foreign corporation to purchase U.S.-produced goods
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U.S.-controlled foreign corporations (>50% owned by U.S. persons and registered on U.R. securities exchanges)
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Labor unions that invest in foreign securities with the money from dues collected abroad from foreign members
87:{\displaystyle {\text{BOP}}={\text{current account}}+{\text{capital account}}\pm {\text{balancing item}}\,}
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Investments that result in the U.S. citizen owning a 10% or more voting stock in the foreign corporation
28:
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For debt obligations having 28.5 years remaining until maturity, the tax is 15% of purchase price
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Insurance companies who invest in foreign securities with premiums collected from foreigners
20:
331:
308:
395:
353:
Butterworth, Robert A. (June 1970). "The United States
Interest Equalization Tax".
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24:
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Debt obligations acquired by commercial banks to make loans (deposits, etc.)
31:
deficit. Originally intended to be a temporary tax, it lasted until 1974.
366:
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For debt obligations there is a range between the following bounds:
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In the years 1965 to 1966, the deficit averaged $ 1.1 billion
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For debt obligations having 3 to 3.5 years remaining until
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Between 1961 and 1964, the deficit averaged $ 2.5 billion
19:
was a domestic tax measure implemented by U.S. President
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Debt obligations with less than 3 years remaining until
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The tax was expected to raise $ 30 million per year.
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145:Change in domestic ownership of foreign assets
128:Change in foreign ownership of domestic assets
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273:In 1968, there was a surplus of $ 93 million
27:. The design of the tax was to reduce the
402:United States federal taxation legislation
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97:The identity for the capital account is:
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382:A Financial History of the United States
332:"The Interest Equalization Act of 1963"
309:"The Interest Equalization Act of 1963"
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270:In 1967, the deficit was $ 3.5 billion
7:
199:, the tax is 2.75% of purchase price
218:Investments in developing countries
14:
1:
330:Joint Committee on Taxation.
307:Joint Committee on Taxation.
187:, the tax is 15% of the price
281:Effect on Financial Markets
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17:Interest Equalization Tax
355:Lawyer of the Americas
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256:Effect on the Deficit
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380:Markham, Jerry W.
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29:balance-of-payment
248:Estimated Revenue
178:Amount of the tax
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170:Dates Effective
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114:Capital account
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72:capital account
64:current account
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21:John F. Kennedy
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384:. p. 328.
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80:balancing item
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361:(2): 164–72.
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334:. US Congress
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311:. US Congress
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336:. Retrieved
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313:. Retrieved
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183:For foreign
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338:27 February
315:27 February
294:References
288:eurodollar
207:Exemptions
41:securities
25:securities
140:−
76:±
396:Category
367:40175358
290:market.
214:maturity
197:maturity
35:Purpose
365:
185:stocks
363:JSTOR
340:2011
317:2011
228:1963
56:BOP
398::
357:.
369:.
359:2
342:.
319:.
123:=
68:+
60:=
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