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International Capital Mobility and Tax Evasion

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  • Alberto Giovannini

Abstract

This paper studies the welfare effects of international investment to evade domestic taxes on domestic investment income. Capital mobility for tax evasion eliminates distortions in the intertemporal allocation of consumption, but introduces distortions in domestic production. Conversely, a regime where residents pay taxes on all investment income, domestic and foreign, introduces distortions in intertemporal consumption allocation, but leaves domestic production distortion-free. The relative magnitude of the interest elasticity of savings and the interest elasticity of domestic investment determines the welfare effects of capital movements for the purpose tax evasion.

Suggested Citation

  • Alberto Giovannini, 1987. "International Capital Mobility and Tax Evasion," NBER Working Papers 2460, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:2460
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    References listed on IDEAS

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    Cited by:

    1. Lawrence H. Goulder & Barry Eichengreen, 1989. "Savings Promotion, Investment Promotion, and International Competitiveness," NBER Chapters, in: Trade Policies for International Competitiveness, pages 5-52, National Bureau of Economic Research, Inc.
    2. Shah, Anwar & Slemrod, Joel, 1990. "Tax sensitivity of foreign direct investment : an empirical assessment," Policy Research Working Paper Series 434, The World Bank.
    3. Slemrod, Joel, 1993. "A North-South Model of Taxation and Capital Flows," Public Finance = Finances publiques, , vol. 48(3), pages 430-447.

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