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Mitigating Double Taxation in an Open Economy

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Author Info
Lindhe, Tobias (Department of Economics)
Abstract

The interaction of various methods of mitigating economic and international double taxation of corporate source income is studied within a standard neoclassical model of firm behavior. The main purpose is to determine to what extent methods effective in mitigating economic double taxation in a closed economy remain useful in an open economy where the firm's marginal investor is a foreigner. While a cut in the statutory corporate tax rate invariably reduces the cost of capital, the impact of the imputation and split rate systems is shown to depend on whether the credit or exemption method is used in mitigating international double taxation, and the precise design of these methods.

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Publisher Info
Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2001:5.

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Length: 22 pages
Date of creation: 01 Feb 2001
Date of revision:
Handle: RePEc:hhs:uunewp:2001_005

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Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
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Web page: http://www.nek.uu.se/
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Related research
Keywords: Corporate taxation; double taxation; cost of capital; open economy;

Find related papers by JEL classification:
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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  1. Hans-Werner Sinn, 1990. "Taxation and the Birth of Foreign Subsidiaries," NBER Working Papers 3519, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. James M. Poterba & Lawrence H. Summers, 1985. "The Economic Effects of Dividend Taxation," NBER Working Papers 1353, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. King, Mervyn A, 1974. "Taxation and the Cost of Capital," Review of Economic Studies, Blackwell Publishing, vol. 41(1), pages 21-35, January. [Downloadable!] (restricted)
  4. 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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  5. Michael Devereux & Harold Freeman, 1995. "The impact of tax on foreign direct investment: Empirical evidence and the implications for tax integration schemes," International Tax and Public Finance, Springer, vol. 2(1), pages 85-106, February. [Downloadable!] (restricted)
  6. Alan J. Auerbach, 1984. "Taxes, Firm Financial Policy and the Cost of Capital: An Empirical Analysis," NBER Working Papers 0955, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Boadway, Robin & Bruce, Neil, 1992. "Problems with integrating corporate and personal income taxes in an open economy," Journal of Public Economics, Elsevier, vol. 48(1), pages 39-66, June. [Downloadable!] (restricted)
    Other versions:
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