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Tax Competition and Foreign Capital

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Author Info
Ronald Davies
Thomas Gresik ()

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Abstract

This paper derives welfare equivalence of double taxation rules in a tax competition model with discriminatory home taxes and the ability to finance subsidiary operations with host country capital. For a more general model, we provide sufficient conditions on the number of host sectors and factors that support double-tax-rule equivalence. Examples violating these conditions help identify economic factors under which a home country has strict preferences over double taxation rules. If the home tax rate can influence host factor prices, the home country weakly prefers deductions over credits as in the pure-home-equity financing case. Copyright Kluwer Academic Publishers 2003

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File URL: http://hdl.handle.net/10.1023/A:1023381705984
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Publisher Info
Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 10 (2003)
Issue (Month): 2 (March)
Pages: 127-145
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Handle: RePEc:kap:apfinm:v:10:y:2003:i:2:p:127-145

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Web page: http://springerlink.metapress.com/link.asp?id=102851

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Related research
Keywords: tax competition; double taxation; foreign capital;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Martin Feldstein, 1997. "Tax Policy and International Capital Flows," NBER Working Papers 4851, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Gordon, Roger H, 1992. " Can Capital Income Taxes Survive in Open Economies?," Journal of Finance, American Finance Association, vol. 47(3), pages 1159-80, July. [Downloadable!] (restricted)
    Other versions:
  3. Alberto Giovannini & R. Glen Hubbard & Joel Slemrod, 1993. "Studies in International Taxation," NBER Books, National Bureau of Economic Research, Inc, number giov93-1.
  4. Osterberg, William P., 1989. "Tobin's q, investment, and the endogenous adjustment of financial structure," Journal of Public Economics, Elsevier, vol. 40(3), pages 293-318, December. [Downloadable!] (restricted)
  5. Bond, E.W. & Samuelson, L., 1988. "Strategic Behavior And The Rules For International Taxation Of Capital," Papers 3-88-10, Pennsylvania State - Department of Economics.
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  6. Martin Feldstein, 1994. "The Effects of Outbound Foreign Direct Investment on the Domestic Capital Stock," NBER Working Papers 4668, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Martin Feldstein & Charles Horioka, 1980. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Jones, Ronald W & Coelho, Isaias, 1985. "International Factor Movements and the Ramaswami Argument," Economica, London School of Economics and Political Science, vol. 52(27), pages 359-64, August. [Downloadable!] (restricted)
  9. Feldstein, Martin & Hartman, David, 1979. "The Optimal Taxation of Foreign," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 613-29, November. [Downloadable!] (restricted)
  10. Razin, Assaf & Sadka, Efraim & Yuen, Chi-Wa, 1998. "A pecking order of capital inflows and international tax principles," Journal of International Economics, Elsevier, vol. 44(1), pages 45-68, February. [Downloadable!] (restricted)
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  11. Janeba, Eckhard, 1995. "Corporate income tax competition, double taxation treaties, and foreign direct investment," Journal of Public Economics, Elsevier, vol. 56(2), pages 311-325, February. [Downloadable!] (restricted)
  12. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October. [Downloadable!] (restricted)
  13. Horst, Thomas, 1977. "American Taxation of Multinational Firms," American Economic Review, American Economic Association, vol. 67(3), pages 376-89, June.
  14. James R. Hines Jr., 1994. "Credit and Deferral as International Investment Incentives," NBER Working Papers 4191, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Wilson, John Douglas, 1987. "Trade, Capital Mobility, and Tax Competition," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 835-56, August. [Downloadable!] (restricted)
  16. Martin Feldstein, 1994. "Taxes, Leverage and the National Return on Outbound Foreign Direct Investment," NBER Working Papers 4689, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  17. Rosanne Altshuler & Jack Mintz, 1994. "U.S. Interest Allocation Rules: Effects and Policy," NBER Working Papers 4712, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  18. Harm Zebregs, 1998. "Can the Neoclassical Model Explain the Distribution of Foreign Direct Investment Across Developing Countries?," IMF Working Papers 98/139, International Monetary Fund.
  19. Hartman, David G., 1985. "Tax policy and foreign direct investment," Journal of Public Economics, Elsevier, vol. 26(1), pages 107-121, February. [Downloadable!] (restricted)
  20. Guy V.G. Stevens & Robert E. Lipsey, 1988. "Interactions between domestic and foreign investment," International Finance Discussion Papers 329, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  21. Calvo, Guillermo & Wellisz, Stanislaw, 1983. "International factor mobility and national advantage," Journal of International Economics, Elsevier, vol. 14(1-2), pages 103-114, February. [Downloadable!] (restricted)
  22. Jones, Ronald W. & Coelho, Isaias & Easton, Stephen T., 1986. "The theory of international factor flows: The basic model," Journal of International Economics, Elsevier, vol. 20(3-4), pages 313-327, May. [Downloadable!] (restricted)
  23. G. Peter Wilson & R. Glen Hubbard & Joel Slemrod, 1993. "The Role of Taxes in Location and Sourcing Decisions," NBER Chapters, in: Studies in International Taxation, pages 195-234 National Bureau of Economic Research, Inc. [Downloadable!]
  24. Leechor, Chad & Mintz, Jack, 1993. "On the taxation of multinational corporate investment when the deferral method is used by the capital exporting country," Journal of Public Economics, Elsevier, vol. 51(1), pages 75-96, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Daniel Millimet & Abdullah Kumas, 2007. "Reassessing the Effects of Bilateral Tax Treaties on US FDI Activity," Departmental Working Papers 0704, Southern Methodist University, Department of Economics. [Downloadable!]
  2. Thomas Dickescheid, 2004. "Exemption vs. Credit Method in International Double Taxation Treaties," Asia-Pacific Financial Markets, Springer, vol. 11(6), pages 721-739, November. [Downloadable!] (restricted)
  3. Christian Keuschnigg & Peter Egger & Wolfgang Eggert & Hannes Winner, 2009. "Corporate Taxation, Debt Financing and Foreign Plant Ownership," University of St. Gallen Department of Economics working paper series 2009 2009-01, Department of Economics, University of St. Gallen. [Downloadable!]
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