Final answer:
The query concerns the tax discrepancy on reinvested foreign income between what is paid abroad and what would potentially be paid under U.S. tax rates, considering factors like the Tobin tax and U.S. taxation of nominal gains without inflation adjustment.
Step-by-step explanation:
The question asks about the difference in tax paid on foreign income that is permanently reinvested in the foreign country compared to the amount that would have been paid if taxed at U.S. rates. It involves understanding international capital flows and taxation policies like the Tobin tax. Such taxes on foreign exchange transactions can affect short-term portfolio investments while exemptions are potentially provided for long-term foreign direct investments. Furthermore, the U.S. taxes the nominal interest without an adjustment for inflation, leading to scenarios where investors pay tax on nominal gains even when real interest rates are zero or negative due to inflation.
Companies or individuals investing internationally may face different tax liabilities based on their investment decisions and the interaction between U.S. tax policy and foreign tax regulations. This discrepancy in taxation can have significant implications for the real value of their invested capital.