A North-South Model of Taxation and Capital Flows
AbstractThis paper presents a simple two-country model of the role of taxation in capital flows between developed countries ("The North") and developing countries ("The South"). The Southern country is assumed to be unable to enforce a tax on its residents' foreign-source income, and the Northern country chooses not to impose a withholding tax on portfolio income earned in its country. The world equilibrium in the model is characterized by excessive (by the standard of global efficiency and Southern welfare) flows of capital across borders, and insufficient investment located in the South. National income of the South could, under certain conditions, be improved if the North would impose a withholding tax on portfolio income that leaves the country, even though the South sacrifices tax revenue to the North. A Southern tax on foreign-source income may dominate this, depending on the resource cost of enforcing such a tax.
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Bibliographic InfoArticle provided by in its journal Public Finance = Finances publiques.
Volume (Year): 48 (1993)
Issue (Month): 3 ()
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Other versions of this item:
- Joel Slemrod, 1990. "A North-South Model of Taxation and Capital Flow," NBER Working Papers 3238, National Bureau of Economic Research, Inc.
- Slemrod, J., 1990. "A North-South Model Of Taxation And Capital Flows," Working Papers 257, Research Seminar in International Economics, University of Michigan.
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.:
- Alberto Giovannini, 1987. "International Capital Mobility and Tax Evasion," NBER Working Papers 2460, National Bureau of Economic Research, Inc.
- Shah, Anwar & Slemrod, Joel, 1990. "Tax sensitivity of foreign direct investment : an empirical assessment," Policy Research Working Paper Series 434, The World Bank.
- Wildasin, David E. & Wilson, John Douglas, 1998. "Risky local tax bases: risk-pooling vs. rent-capture," Journal of Public Economics, Elsevier, vol. 69(2), pages 229-247, June.
- Slemrod, Joel & Hansen, Carl & Procter, Roger, 1997.
"The seesaw principle in international tax policy,"
Journal of Public Economics,
Elsevier, vol. 65(2), pages 163-176, August.
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