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Taxing mobile capital in free trade zones to the detriment of workers

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  • Glenn P. Jenkins
  • Chun-Yan Kuo

Abstract

Many countries have exempted the income of firms operating in their free trade or export processing zones from corporate income taxation. This paper examines the long-term economic effects of removing this exemption in the Dominican Republic. The results suggest that removal of the corporate income tax exemption could inflict a burden on relatively low-waged workers of about ten times the amount of additional tax revenue collected. The analysis also measures the consequential impacts on prices of goods and services in the economy. It indicates that wealthier groups in society will gain substantially in real income.

Suggested Citation

  • Glenn P. Jenkins & Chun-Yan Kuo, 2019. "Taxing mobile capital in free trade zones to the detriment of workers," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 26(3), pages 207-222, May.
    • Handle: RePEc:taf:raaexx:v:26:y:2019:i:3:p:207-222
    DOI: 10.1080/16081625.2017.1392878
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    References listed on IDEAS

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    1. Arnold C. Harberger, 1962. "The Incidence of the Corporation Income Tax," Journal of Political Economy, University of Chicago Press, vol. 70(3), pages 215-215.
    2. Glenn P. Jenkins & Chun‐Yan Kuo & Keh‐Nan Sun, 2003. "Taxation and Economic Development in Taiwan," American Journal of Economics and Sociology, Wiley Blackwell, vol. 62(4), pages 734-735, October.
    3. Michael Daly, 2006. "WTO Rules on Direct Taxation," The World Economy, Wiley Blackwell, vol. 29(5), pages 527-557, May.
    4. Hector Cury & Glenn Jenkins & CHUN-YAN KUO, 2004. "Fiscal Adjustment for Sustainable Growth in the Dominican Republic," Development Discussion Papers 2004-01, JDI Executive Programs.
    5. Jane Gravelle & Kent Smetters, 2001. "Who Bears the Burden of the Corporate Tax in The Open Economy?," NBER Working Papers 8280, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Aiwu Zhao & Jingyi Wang & Hongjun Guan, 2022. "Has the Free Trade Zone Construction Promoted the Upgrading of the City’s Industrial Structure?," Sustainability, MDPI, vol. 14(9), pages 1-21, May.
    2. Li, Sujuan & Liu, Jiaguo & Kong, Yudan, 2021. "Pilot free trade zones and Chinese port-listed companies performance: An empirical research based on quasi-natural experiment," Transport Policy, Elsevier, vol. 111(C), pages 125-137.

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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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