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Strategic Capital Taxation in Large Open Economies with Mobile Capital

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  • Jiming Ha
  • Anne Sibert

Abstract

The purpose of this paper is to provide a methodologyfor computing time-consistent, strategic capital taxes in a largeopen economy and to analyze the nature of these taxes. Our resultssuggest that even if a full set of nondistortionary taxes isunavailable and even if the government has redistributive goals,the country which imports capital should tax corporate capitaland the capital exporter should subsidize it. We perform comparativestatics experiments to show how strategically chosen taxes varywith the parameters of the model. JEL classifications: H21,E62 Copyright Kluwer Academic Publishers 1997

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Bibliographic Info

Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 4 (1997)
Issue (Month): 3 (July)
Pages: 243-262

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Handle: RePEc:kap:itaxpf:v:4:y:1997:i:3:p:243-262

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Web page: http://www.springerlink.com/link.asp?id=102915

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Keywords: capital taxation; capital mobility;

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  1. Bovenberg, A.L., 1986. "Capital income taxation in growing open economies," Open Access publications from Tilburg University urn:nbn:nl:ui:12-152946, Tilburg University.
  2. Joosung Jun, 1989. "U.S. Tax Policy and Direct Investment Abroad," NBER Working Papers 3049, National Bureau of Economic Research, Inc.
  3. David G. Hartman, 1981. "Domestic Tax Policy and Foreign Investment: Some Evidence," NBER Working Papers 0784, National Bureau of Economic Research, Inc.
  4. Gordon, Roger H, 1986. "Taxation of Investment and Savings in a World Economy," American Economic Review, American Economic Association, vol. 76(5), pages 1086-1102, December.
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  6. Buiter, Willem H & Kletzer, Kenneth, 1990. "The Welfare Economics of Cooperative and Uncooperative Fiscal Policy," CEPR Discussion Papers 420, C.E.P.R. Discussion Papers.
  7. Jason G. Cummins & R. Glenn Hubbard, 1994. "The Tax Sensitivity of Foreign Direct Investment: Evidence from Firm-Level Panel Data," NBER Working Papers 4703, National Bureau of Economic Research, Inc.
  8. Lawrence H. Summers, 1986. "Tax Policy and International Competitiveness," NBER Working Papers 2007, National Bureau of Economic Research, Inc.
  9. Murray C. Kemp, 1962. "Foreign Investment And The National Advantage," The Economic Record, The Economic Society of Australia, vol. 38(81), pages 56-62, 03.
  10. Chamley, Christophe, 1981. "The Welfare Cost of Capital Income Taxation in a Growing Economy," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 468-96, June.
  11. Ghosh, A.R., 1990. "Strtegic Aspects Of Public Finance In A World With High Capital Mobility," Papers 49, Princeton, Woodrow Wilson School - Discussion Paper.
  12. G. D. A. MacDougall, 1960. "THE BENEFITS and COSTS OF PRIVATE INVESTMENT FROM ABROAD: A THEORETICAL APPROACH," The Economic Record, The Economic Society of Australia, vol. 36(73), pages 13-35, 03.
  13. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-22, May.
  14. Kehoe, Patrick J, 1989. "Policy Cooperation among Benevolent Governments May Be Undesirable," Review of Economic Studies, Wiley Blackwell, vol. 56(2), pages 289-96, April.
  15. Kehoe, Patrick J., 1987. "Coordination of fiscal policies in a world economy," Journal of Monetary Economics, Elsevier, vol. 19(3), pages 349-376, May.
  16. Sibert, Anne, 1990. "Taxing capital in a large, open economy," Journal of Public Economics, Elsevier, vol. 41(3), pages 297-317, April.
  17. Assaf Razin & Efraim Sadka, 1991. "Vanishing Tax on Capital Income in the Open Economy," NBER Working Papers 3796, National Bureau of Economic Research, Inc.
  18. Berndt, Ernst R, 1976. "Reconciling Alternative Estimates of the Elasticity of Substitution," The Review of Economics and Statistics, MIT Press, vol. 58(1), pages 59-68, February.
  19. Sibert, Anne C, 1985. "Capital Accumulation and Foreign Investment Taxation," Review of Economic Studies, Wiley Blackwell, vol. 52(2), pages 331-45, April.
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Citations

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Cited by:
  1. Quadrini, Vincenzo, 2005. "Policy commitment and the welfare gains from capital market liberalization," European Economic Review, Elsevier, vol. 49(8), pages 1927-1951, November.
  2. Cees Withagen & Alex Halsema, 2013. "Tax competition leading to strict environmental policy," International Tax and Public Finance, Springer, vol. 20(3), pages 434-449, June.
  3. Geremia Palomba, 2004. "Capital Income Taxation and Economic Growth in Open Economies," IMF Working Papers 04/91, International Monetary Fund.
  4. Lorz, Jens Oliver, 1993. "Der Wettbewerb um international mobiles Kapital: Auswirkungen auf die nationale Finanzpolitik und die intertemporale Kapitalallokation," Kiel Working Papers 608, Kiel Institute for the World Economy.

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