The Abstract: Should Sovereign Wealth Funds Be Taxed?

Taxing the Bandit Kings
Mihir Desai of Harvard and Dhammika Dharmapala of the University of Connecticutt

"It is tempting to view SWFs as, in the words of Mancur Olson, bandit kings--sovereigns using their power to earn unfairly large returns. This view leads many to seek a fiscal response, but such proposals overlook a critical dimension of this setting--the nature of the portfolio problem for nontaxable investors. Aside from the potential response to the repeal of § 892, it is worth noting that some have also argued that SWFs are hardly bandits. Their investment decisions appear, on average, to transfer wealth to, rather than from, Americans. As such, the words of William Wordsworth may provide a cautionary coda: "Tax not the royal Saint with vain expense."

What Do Chinese Businessmen Think of Globalization?
Aminu Mamman of the University of Manchester and Kui Liu of the New Humai Group

A survey of 128 business people in Beijing "revealed that most of the respondents view globalization from economic perspective rather than from cultural convergence or political convergence perspective. Most significantly, they view globalization as representing one economic system in the world - which is capitalism. They view globalization not only as economic activities but as a philosophical and ideological (not cultural) shift in the way the world conducts economic activities."

Should Banking Be Kept Separate from Commerce
Alexander Raskovich of the U.S. Dept. of Justice

"In the U.S., unlike much of the rest of the world, the mixing of banking and commerce is largely prohibited. One exception is industrial loan companies (ILCs), state chartered depository institutions some of which are owned by commercial parents. In 2006, the FDIC put a moratorium on the chartering of new ILCs pending resolution of a controversy sparked by Wal-Mart's application to start up an ILC in Utah. Wal-Mart subsequently withdrew its bid. This paper reviews the major arguments that have been raised against the mixing of banking and commerce, finding most to be theoretically weak or lacking in empirical support, and discusses several efficiencies that may arise from the integration of banking and commerce."