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Short-Term and Long-Term Government Debt and Nonresident Interest Withholding Taxes

  • Harry P. Huizinga
  • Jan J.G. Lemmen
  • Sylvester C.W. Eijffinger

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 the pooled cross-section, time-series regressions. The evidence suggests that the yields on national Treasury-bill and on 5-year government bonds fully reflect the 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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File URL: http://www.lse.ac.uk/fmg/workingPapers/discussionPapers/fmg_pdfs/dp275.pdf
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Paper provided by Financial Markets Group in its series FMG Discussion Papers with number dp275.

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Date of creation: Sep 1997
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Handle: RePEc:fmg:fmgdps:dp275
Contact details of provider: Web page: http://www.lse.ac.uk/fmg/

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  1. Demirguc-Kunt, Ash & Huizinga, Harry, 1995. "Barriers to portfolio investments in emerging stock markets," Journal of Development Economics, Elsevier, vol. 47(2), pages 355-374, August.
  2. Huizinga, Harry, 1996. "The incidence of interest withholding taxes: Evidence from the LDC loan market," Journal of Public Economics, Elsevier, vol. 59(3), pages 435-451, March.
  3. Lemmen, J.J.G. & Eijffinger, S.C.W., 1996. "The Fundamental Determinants of Financial Integration in the European Union," Other publications TiSEM b994dede-d928-4b3b-bf51-7, Tilburg University, School of Economics and Management.
  4. Frenkel, Jacob A & Levich, Richard M, 1977. "Transaction Costs and Interest Arbitrage: Tranquil versus Turbulent Periods," Journal of Political Economy, University of Chicago Press, vol. 85(6), pages 1209-26, December.
  5. Aliber, Robert Z, 1973. "The Interest Rate Parity Theorem: A Reinterpretation," Journal of Political Economy, University of Chicago Press, vol. 81(6), pages 1451-59, Nov.-Dec..
  6. George Kopits, 1992. "Tax harmonization in the European Community; Policy Issues and Analysis," IMF Occasional Papers 94, International Monetary Fund.
  7. Harry Huizinga, 1994. "International interest withholding taxation: Prospects for a common European policy," International Tax and Public Finance, Springer, vol. 1(3), pages 277-291, October.
  8. Andrew B. Lyon & Gerald Silverstein, 1995. "The Alternative Minimum Tax and the Behavior of Multinational Corporations," NBER Chapters, in: The Effects of Taxation on Multinational Corporations, pages 153-180 National Bureau of Economic Research, Inc.
  9. Taylor, Mark P, 1987. "Covered Interest Parity: A High-Frequency, High-Quality Data Study," Economica, London School of Economics and Political Science, vol. 54(216), pages 429-38, November.
  10. Dooley, Michael P & Isard, Peter, 1980. "Capital Controls, Political Risk, and Deviations from Interest-Rate Parity," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 370-84, April.
  11. Feenberg, D.R. & Poterba, J.M., 1991. "Which Households Own Municipal Bonds? Evidence from Tax Returns," Working papers 588, Massachusetts Institute of Technology (MIT), Department of Economics.
  12. Taylor, Mark P, 1989. "Covered Interest Arbitrage and Market Turbulence," Economic Journal, Royal Economic Society, vol. 99(396), pages 376-91, June.
  13. Clinton, Kevin, 1988. "Transactions Costs and Covered Interest Arbitrage: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 358-70, April.
  14. 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, vol. 2(2), pages 247-57, May.
  15. Frenkel, Jacob A & Levich, Richard M, 1975. "Covered Interest Arbitrage: Unexploited Profits?," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 325-38, April.
  16. James M. Poterba, 1986. "Explaining the Yield Spread between Taxable and Tax-exempt Bonds: The Role of Expected Tax Policy," NBER Chapters, in: Studies in State and Local Public Finance, pages 5-52 National Bureau of Economic Research, Inc.
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