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What U.S. Could Learn From India's New Tax on Share Buybacks

  • India enacts a 20% duty on companies buying back their shares
  • Buyback tax ‘very puzzling to an academic,’ professor says
Pedestrians look up at an electronic ticker board showing a budget news report outside the Bombay Stock Exchange in Mumbai.
Photographer: Dhiraj Singh/Bloomberg
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Politicians from both sides of the aisle in Washington are agitating for curbs on the record pace of stock buybacks planned by American companies. But agitation has turned to outright action in one of the world’s 10 biggest stock markets.

India this month imposed a levy on its companies’ share purchases. The proximate motive was to close a loophole after introducing a dividend tax two years back -- to ensure that companies pay something no matter how they return cash to shareholders. India’s practice of taxing markets started at least 15 years ago, when it put a duty on most financial transactions, a measure that European politicians have also been looking at.