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Short-term and long-term government debt and non resident interest witholding taxes

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  • Eijffinger, S.C.W.

    (Tilburg University)

  • Huizinga, H.P.

    (Tilburg University)

  • Lemmen, J.J.G.

    (Tilburg University)

Abstract

This paper examines the incidence of nonresident interest withholding taxes in the international 3-month Treasury-bill market and the international 5-year government bond market.The approach is one of pooled cross-section, time-series regressions.We find that, in general, U.S. dollar yields on national Treasury-bills and pre-tax 5-year government bond yields fully reflect nonresident interest withholding taxes imposed on American or Japanese investors.Nonresident interest withholding taxes on short-term and long-term government debt thus do not appear to be borne by the international investor.

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Bibliographic Info

Paper provided by Tilburg University in its series Open Access publications from Tilburg University with number urn:nbn:nl:ui:12-76575.

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Date of creation: 1998
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Publication status: Published in Journal of Public Economics (1998) v.68, p.309-334
Handle: RePEc:ner:tilbur:urn:nbn:nl:ui:12-76575

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Web page: http://www.tilburguniversity.edu/

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  1. Andrew B. Lyon & Gerald Silverstein, 1995. "The Alternative Minimum Tax and the Behavior of Multinational Corporations," NBER Chapters, National Bureau of Economic Research, Inc, in: The Effects of Taxation on Multinational Corporations, pages 153-180 National Bureau of Economic Research, Inc.
  2. Demirguc-Kunt, Asli & Huizinga, Harry, 1992. "Barriers to portfolio investments in emerging stock markets," Policy Research Working Paper Series 984, The World Bank.
  3. Harry Huizinga, 1994. "International interest withholding taxation: Prospects for a common European policy," International Tax and Public Finance, Springer, Springer, vol. 1(3), pages 277-291, October.
  4. Aliber, Robert Z, 1973. "The Interest Rate Parity Theorem: A Reinterpretation," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 81(6), pages 1451-59, Nov.-Dec..
  5. Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, Econometric Society, vol. 55(3), pages 703-08, May.
  6. Huizinga, H.P., 1994. "The incidence of interest withholding taxes: Evidence from the LDC loan markets," Discussion Paper, Tilburg University, Center for Economic Research 1994-95, Tilburg University, Center for Economic Research.
  7. Officer, Lawrence H & Willett, Thomas D, 1970. "The Covered-Arbitrage Schedule: A Critical Survey of Recent Developments," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 2(2), pages 247-57, May.
  8. Lemmen, J.J.G. & Eijffinger, S.C.W., 1995. "The fundamental determinants of financial integration in the European Union," Discussion Paper, Tilburg University, Center for Economic Research 1995-117, Tilburg University, Center for Economic Research.
  9. Taylor, Mark P, 1989. "Covered Interest Arbitrage and Market Turbulence," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 99(396), pages 376-91, June.
  10. Feenberg, D.R. & Poterba, J.M., 1991. "Which Households Own Municipal Bonds? Evidence from Tax Returns," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 588, Massachusetts Institute of Technology (MIT), Department of Economics.
  11. George Kopits, 1992. "Tax harmonization in the European Community," IMF Occasional Papers 94, International Monetary Fund.
  12. Clinton, Kevin, 1988. "Transactions Costs and Covered Interest Arbitrage: Theory and Evidence," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(2), pages 358-70, April.
  13. Taylor, Mark P, 1987. "Covered Interest Parity: A High-Frequency, High-Quality Data Study," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 54(216), pages 429-38, November.
  14. Frenkel, Jacob A & Levich, Richard M, 1975. "Covered Interest Arbitrage: Unexploited Profits?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 83(2), pages 325-38, April.
  15. Frenkel, Jacob A & Levich, Richard M, 1977. "Transaction Costs and Interest Arbitrage: Tranquil versus Turbulent Periods," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 85(6), pages 1209-26, December.
  16. Dooley, Michael P & Isard, Peter, 1980. "Capital Controls, Political Risk, and Deviations from Interest-Rate Parity," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 88(2), pages 370-84, April.
  17. Huizinga, H., 1994. "The Incidence of Interest Withholding Taxes: Evidence from the LCD Loan Market," Papers, Tilburg - Center for Economic Research 9495, Tilburg - Center for Economic Research.
  18. James M. Poterba, 1986. "Explaining the Yield Spread between Taxable and Tax-exempt Bonds : The Role of Expected Tax Policy," NBER Chapters, National Bureau of Economic Research, Inc, in: Studies in State and Local Public Finance, pages 5-52 National Bureau of Economic Research, Inc.
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Cited by:
  1. Uhlig, H.F.H.V.S., 1997. "Long Term Debt and the Political Support for a Monetary Union," Discussion Paper, Tilburg University, Center for Economic Research 1997-13, Tilburg University, Center for Economic Research.
  2. Landon, Stuart, 2009. "The capitalization of taxes in bond prices: Evidence from the market for Government of Canada bonds," Journal of Banking & Finance, Elsevier, Elsevier, vol. 33(12), pages 2175-2184, December.
  3. Landon, Stuart & Smith, Constance, 2008. "Taxation and bond market investment strategies: Evidence from the market for Government of Canada bonds," MPRA Paper 9959, University Library of Munich, Germany.
  4. Demirguc-Kunt, Asli & Huizinga, Harry, 1998. "Determinants of commercial bank interest margins and profitability : some international evidence," Policy Research Working Paper Series 1900, The World Bank.
  5. Huizinga, Harry & Nicodeme, Gaetan, 2004. "Are international deposits tax-driven," Journal of Public Economics, Elsevier, Elsevier, vol. 88(6), pages 1093-1118, June.

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