Tariff Jumping Foreign Investment and Capital Taxation
This paper reconsiders the welfare effects of "tariff jumping" direct investment if mobile capital is subjected to taxation. In contrast to the conventional wisdom, the receiving country may in this case gain from the incremental inflow of capital, as this diverts tax revenues from the rest of the world. In the case of perfect capital mobility, this possibility becomes a certainty. Our argument provides one rationale for a small country to levy a distorting tariff in a second best world in which capital taxes already exist.
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- Harry Huizinga & Soeren Bo Nielsen, "undated".
"Capital Income and Profits Taxation with Foreign Ownerwhip of Firms,"
EPRU Working Paper Series
95-09, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
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"Can Capital Income Taxes Survive in Open Economies?,"
NBER Working Papers
3416, National Bureau of Economic Research, Inc.
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