In recent years, the world has experienced an unprecedented degree of global financial integration. Increasingly, these cross-border investment flows take the form of foreign portfolio investment (FPI) by individuals and institutions, rather than foreign direct investment (FDI) by multinational firms. Yet, existing international tax policy norms are largely focused on the taxation of FDI. This paper proposes a new principle – global portfolio neutrality (GPN) – for assessing the efficiency of tax policy towards FPI. Unlike existing principles of international taxation that address FDI and worldwide welfare, GPN explicitly addresses national welfare maximization and is derived from a framework that emphasizes risk considerations and portfolio diversification as central motivations for FPI. With respect to outbound FPI, GPN entails imposing the same tax rate on domestic and foreign investment income. With respect to inbound FPI, GPN entails imposing the same tax rate on foreign portfolio investors that they face at home. Examples where this principle is violated in practice are discussed, and possible remedies are proposed. Lessons are drawn for various policy questions, including the much-debated issue of the appropriate taxation of sovereign wealth funds.