A Pecking Order Theory of Capital Inflows and International Tax Principles
AbstractEven though financial markets today show a high degree of integration, the world capital market is still far from the textbook story of high capital mobility. The failure to have a tax scheme in which the rate of returns across countries are equated can result in inefficient capital flows across countries. This comes from the interactions of market failure and the tax system. The purpose of this paper is to highlight some key sources of market failure in the context of international capital flows and to provide guidelines for efficient tax structure in the presence of capital market imperfections. We distinguish among three main types of international capital flows: foreign portfolio debt investment (FPDI), foreign portfolio equity investment (FPEI), and foreign direct investment (FDI). The paper emphasizes the efficiency of non-uniform tax treatment of the various vehicles of international capital flows.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 96/26.
Date of creation: 01 Apr 1996
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Other versions of this item:
- Razin, Assaf & Sadka, Efraim & Yuen, Chi-Wa, 1996. "A Pecking Order Theory of Capital Inflows and International Tax Principles," CEPR Discussion Papers 1381, C.E.P.R. Discussion Papers.
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F35 - International Economics - - International Finance - - - Foreign Aid
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
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