Thread by @Brad_Setser

Bermuda alone accounted for over a quarter of all dividends paid by the subsidiaries of US companies abroad back to their U.S. parents in 2018.

(e.g. why you need to understand tax to understand the balance of payments these days)

(1/x)

Ireland incidentally was suppressed b/c it would reveal too much about the finances of a single company (odds are, Apple, as it is now an Irish tax resident)

(2/x)

And a more subtle point -- the fall in US FDI abroad in 2018 was all from "holding companies" who paid $319b back to their parents in 2018 (that's the repatriation of the "offshore" cash). Real investment abroad continued to increase

(3/x)

What are these holdcos? basically, the tax subs of U.S. MNCs (e.g. they own the offshore rights to their IP). How do we know? Look at where these holdcos are located ....

(4/x)

I know there is a tremendous interest in the distortions created by tariffs these days. Understandably so.

But it is almost impossible to look at the detailed data on US FDI abroad and not to see tremendous tax-driven distortions.

(5/5)

bea.gov/news/blog/2019…