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Optimal Tariff and Profit Taxes for the Multinational Enterprise

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  • Itagaki, Takao

Abstract

This paper first derives a formula for the optimal host country tariff for a monopolistic multinational enterprise, and clarifies the rationales for the trade policy for such a firm. Then, after deriving a formula for the optimal host country profit tax, the paper indicates that a combination of the two policies is better than either one of them. The paper demonstrates that both optimal host and home country profit taxes may even be negative. In addition, it considers interaction of the optimal profit tax policies of the two countries. Moreover, the implications of variability of transfer price for the optimal policies are clarified. Copyright 1989 by Blackwell Publishers Ltd and The Victoria University of Manchester

Suggested Citation

  • Itagaki, Takao, 1989. "Optimal Tariff and Profit Taxes for the Multinational Enterprise," The Manchester School of Economic & Social Studies, University of Manchester, vol. 57(1), pages 58-74, March.
    • Handle: RePEc:bla:manch2:v:57:y:1989:i:1:p:58-74
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