income taxation of sovereign wealth funds - un.DOCVIP

INCOME TAXATION OF SOVEREIGN WEALTH FUNDS by Charles R. Irish, Director East Asian Legal Studies Center Volkman-Bascom Professor of Law University of Wisconsin Madison, USA crirish@ July, 2008 1. Introduction. Sovereign wealth funds (“SWFs”) have existed for a long time, but the sharp escalation in energy prices and the major trade imbalances of several East and Southeast Asian economies have generated significant government surpluses and corresponding growth in the SWFs. Based on information that is generally available, assets under management by SWFs now are approaching US$4,000,000,000,000 (US$4 trillion) and the IMF projects estimates that foreign assets under SWF management will grow to US$6 trillion to US$10 trillion by 2013. Major Sovereign Wealth Funds Country of origin Name Assets under management (US$ billions) UAE – Abu Dhabi Abu Dhabi Investment Authority $875 Norway Government Pension Fund – Global $396.5 Saudi Arabia SAMA Foreign Holdings $365.2 Singapore Government of Singapore Investment Corporation $330 China SAFE Investment Company $311.6 Kuwait Kuwait Investment Authority $264.4 China China Investment Corporation $200 China – Hong Kong Hong Kong Monetary Authority Investment Portfolio $173 Russia National Welfare Fund $162.5 Singapore Temasek Holdings $159 China National Social Security Fund $74 Qatar Qatar Investment Authority $60 Australia Australian Future Fund $58.5 Libya Libyan Investment Authority $50 Source: Sovereign Wealth Fund Institute at /funds.php The assets under management by SWFs now are greater than the assets managed by private equity and hedge funds (estimated at about US$2.2 trillion in 2007), but the SWFs still represent a small proportion of global financial assets, estimated at US$190 trillion. SWFs also manage much smaller amounts than are held by pension funds (US$26 trillion), mutual funds (US$22 trillion) and insurance companies (US$17 trillion). SWFs have been in the news only partly because