It doesn't have to be anything as exotic as taking measures attacking free flows of capital. Nearly every developed country has a tax treaty with every other developed country. All it would take for a foreign investor to be royally screwed would be a unilateral rescission of those tax treaties. So, instead of having a withholding tax of 15% on interest and dividends, it could suddenly be 75%. Or, as a riff on Mungo's preoccupation with treasuries, it could be that a withholding tax would suddenly be applied to principal repayments as well as interest and dividends. And forget about the 0% withholding rate for retirement accounts.

Now, you might say, "Stubble, that's ding-bat stuff. Countries don't unilaterally abandon treaties that they've signed and surely they can figure out taxing a principal repayment is much different than taxing an interest or dividend payment." And, normally I would agree with that.


SJ