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services.49 The tax benefits of investing in the United States, which result in a much

lower tax burden than operating in some of the industrialized European economies with

the exception of Great Britain made the country equally a good choice for future


However, the OECD in its haste to categorize the less developed countries as offering

preferential tax regimes has failed miserably to take note of the advantages offered by the

United States as tax incentives. The United States has several key elements found in its

laws which experts argue have been “conveniently ignored by the OECD50.” The US has

allowed portfolio interest of foreign persons since 1984 to be paid free of U.S. income

tax51. Similarly, interest paid to alien persons on treasury bills, government bonds, and

many other corporate bonds is generally free of US income tax whereas its is fully

payable where those interests are accrued by an American citizen or resident.52

In addition, the long-term capital gains that are earned by a US resident or citizen are

taxed at a reduced rate. On the other hand, short term capital gains such as that arriving

from day trading is taxed under federal income tax rate of up to 39.6 per centum.

This is in contrast to the position with regard to foreign persons. All of the capital gains

that are earned by foreign persons other than for the sale of US real property are tax-

free.53 The United States’ estate and gift tax which can be as high as 55 percent on the

49 According to The Economist article…Despite concerns about a slowdown in its economy, America remains the most attractive destination for foreign direct investment. Ibid note 46 at page 668 Sections 871(h), 881(c) Supra Ibid note 46. Langer points out that he has personally advised of a case where a foreign individual earned in excess of $120M in day trading profits during 1999 that had been treated as tax-free capital gains. 50 51 52 53

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