IDEAS home Printed from
   My bibliography  Save this article

Some Optimal Tax Rules for International Portfolio and Direct Investment


  • Michael P. Devereux


This paper explores the optimal international tax policy of a small open economy with inbound and outbound flows of both portfolio and direct investment. Only three independent conditions determine the optimal rates of six taxes, implying that there are no unique values of optimal tax rates. For example, the optimal tax rates on domestic and inbound direct investment are related through a two sector general equilibrium model. In general, optimal tax rates on inbound investment are not zero, and those on domestic and outbound investment are not equal.

Suggested Citation

  • Michael P. Devereux, 2004. "Some Optimal Tax Rules for International Portfolio and Direct Investment," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 60(1), pages 1-1, April.
  • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200404)60:1_1:sotrfi_2.0.tx_2-g

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    References listed on IDEAS

    1. McGuire, Martin C & Shrestha, Ratna K, 2003. "A New Approach to Group Structure, Burden Sharing, and the Equilibrium Provision of Public Goods," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(4), pages 341-356, August.
    2. Sandler, Todd, 1977. "Impurity of Defense: An Application to the Economics of Alliances," Kyklos, Wiley Blackwell, vol. 30(3), pages 443-460.
    3. Ihori, Toshihiro, 1996. "International public goods and contribution productivity differentials," Journal of Public Economics, Elsevier, vol. 61(1), pages 139-154, July.
    4. Boadway, Robin & Hayashi, Masayoshi, 1999. "Country size and the voluntary provision of international public goods," European Journal of Political Economy, Elsevier, vol. 15(4), pages 619-638, November.
    5. Martin McGuire, 1974. "Group size, group homo-geneity, and the aggregate provision of a pure public good under cournot behavior," Public Choice, Springer, vol. 18(1), pages 107-126, June.
    6. Andreoni, James, 1988. "Privately provided public goods in a large economy: The limits of altruism," Journal of Public Economics, Elsevier, vol. 35(1), pages 57-73, February.
    7. Weber, S. & Wiesmeth, H., 1990. "Economic Models of NATO," Papers 90-7, York (Canada) - Department of Economics.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Johannes Becker & Clemens Fuest, 2011. "The taxation of foreign profits — The old view, the new view and a pragmatic view," Intereconomics: Review of European Economic Policy, Springer;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 46(2), pages 92-97, March.
    2. Devereux, Michael P. & Fuest, Clemens & Lockwood, Ben, 2015. "The taxation of foreign profits: A unified view," Journal of Public Economics, Elsevier, vol. 125(C), pages 83-97.
    3. Michael P. Devereux, 2008. "Taxation of outbound direct investment: economic principles and tax policy considerations," Oxford Review of Economic Policy, Oxford University Press, vol. 24(4), pages 698-719, winter.
    4. Kayis-Kumar, Ann, 2015. "Thin capitalisation rules: A second-best solution to the cross-border debt bias?," MPRA Paper 72031, University Library of Munich, Germany.
    5. Christian Keuschnigg & Martin Dietz, 2007. "A growth oriented dual income tax," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(2), pages 191-221, April.
    6. Kayis-Kumar, Ann, 2015. "Taxing cross-border intercompany transactions: are financing activities fungible?," MPRA Paper 71615, University Library of Munich, Germany.

    More about this item


    foreign direct investment; foreign portfolio investment; capital income tax;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mhr:finarc:urn:sici:0015-2218(200404)60:1_1:sotrfi_2.0.tx_2-g. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Wolpert). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.