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Mitigating Double Taxation in an Open Economy

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  • Lindhe, Tobias

    (Department of Economics)

Abstract

The interaction of various methods of mitigating economic and international double taxation of corporate source income is studied within a standard neoclassical model of firm behavior. The main purpose is to determine to what extent methods effective in mitigating economic double taxation in a closed economy remain useful in an open economy where the firm's marginal investor is a foreigner. While a cut in the statutory corporate tax rate invariably reduces the cost of capital, the impact of the imputation and split rate systems is shown to depend on whether the credit or exemption method is used in mitigating international double taxation, and the precise design of these methods.

Suggested Citation

  • Lindhe, Tobias, 2001. "Mitigating Double Taxation in an Open Economy," Working Paper Series 2001:5, Uppsala University, Department of Economics.
    • Handle: RePEc:hhs:uunewp:2001_005
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    References listed on IDEAS

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    1. Mervyn A. King, 1974. "Taxation and the Cost of Capital," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(1), pages 21-35.
    2. Boadway, Robin & Bruce, Neil, 1992. "Problems with integrating corporate and personal income taxes in an open economy," Journal of Public Economics, Elsevier, vol. 48(1), pages 39-66, June.
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    More about this item

    Keywords

    Corporate taxation; double taxation; cost of capital; open economy;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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