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The Optimal Taxation of Income From International Investment: A Geometric Analysis

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  • Mackie James
  • J. Rousslang Donald

Abstract

This paper examines how a capital-exporting country should tax foreign investment Income when saving is variable and the goal is to maximize global welfare. Other Recent studies have assumed either that countries cooperate to achieve this goal, or that they act unilaterally to maximize the national benefit. The present paper returns to the framework used by earlier authors, in which the capital-exporting country acts unilaterally and takes foreign tax rates as given. Unlike the previous studies, it is found that if the capital-exporting country's investments do not alter foreign rates of return, the optimal tax structure may involve higher taxes for foreign than for domestic investment income. H21,H87]

Suggested Citation

  • Mackie James & J. Rousslang Donald, 2000. "The Optimal Taxation of Income From International Investment: A Geometric Analysis," International Economic Journal, Taylor & Francis Journals, vol. 14(4), pages 77-86.
    • Handle: RePEc:taf:intecj:v:14:y:2000:i:4:p:77-86
    DOI: 10.1080/10168730000000036
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    References listed on IDEAS

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    1. John Dutton, 1982. "The Optimal Taxation of International Investment Income: A Comment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 97(2), pages 373-380.
    2. Bruce, Neil, 1992. "A Note on the Taxation of International Capital Income Flows," The Economic Record, The Economic Society of Australia, vol. 68(202), pages 217-221, September.
    3. Findlay, Christopher C, 1986. "Optimal Taxation of International Income Flows," The Economic Record, The Economic Society of Australia, vol. 62(177), pages 208-214, June.
    4. Christopher C. Findlay, 1986. "Optimal Taxation of International Income Flows," The Economic Record, The Economic Society of Australia, vol. 62(2), pages 208-214, June.
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    6. Slemrod, Joel & Hansen, Carl & Procter, Roger, 1997. "The seesaw principle in international tax policy," Journal of Public Economics, Elsevier, vol. 65(2), pages 163-176, August.
    7. Thomas Horst, 1980. "A Note on the Optimal Taxation of International Investment Income," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(4), pages 793-798.
    8. Ruffin, Roy J & Rassekh, Farhad, 1986. "The Role of Foreign Direct Investment in U.S. Capital Outflows," American Economic Review, American Economic Association, vol. 76(5), pages 1126-1130, December.
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