Vanishing Tax on Capital Income in the Open Economy
The increased integration of the world capital market implies that the supply of capital becomes more elastic, and therefore potentially a less efficient base for taxation. In general, the optimal taxation of capital income is subject to two conflicting forces. On the one hand the return on existing capital is a pure rent which is efficient to fully tax away. On the other hand taxing the returns on investment in new capital would retard growth, thus generating inefficiencies. Capturing these considerations, the paper carries out a simple optimal tax analysis for an open economy, which is fully integrated in the world capital markets. The analysis identifies well defined circumstances in which the capital income tax vanishes.
|Date of creation:||Aug 1991|
|Publication status:||published as "The Status of Capital Income Taxation in the Open Economy," Finanz Archiv, vol. 52, pp. 21-32, (April 1995).|
|Note:||ITI PE IFM|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sinn, Hans-Werner, 1990.
"Tax harmonization and tax competition in Europe,"
European Economic Review,
Elsevier, vol. 34(2-3), pages 489-504, May.
- Sinn, Hans-Werner, 1990. "Tax harmonization and tax competition in Europe," Munich Reprints in Economics 19846, University of Munich, Department of Economics.
- Hans-Werner Sinn, 1990. "Tax Harmonization and Tax Competition in Europe," NBER Working Papers 3248, National Bureau of Economic Research, Inc.
- Jacob Frenkel & Assaf Razin & Efraim Sadka, 1991. "International Taxation in an Integrated World," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061430, July.
- Jacob Frenkel & Assaf Razin & Efraim Sadka, 1991. "International Taxation in an Integrated World," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262512149, July.
- Frenkel, Jacob & Razin, Assaf & Sadka, Efraim, 1992. "International taxation in an integrated world," MPRA Paper 23266, University Library of Munich, Germany.
- Razin, Assaf & Sadka, Efraim, 1991. "International tax competition and gains from tax harmonization," Economics Letters, Elsevier, vol. 37(1), pages 69-76, September.
- Assaf Razin & Efraim Sadka, 1989. "International Tax Competition and Gains from Tax Harmonization," NBER Working Papers 3152, National Bureau of Economic Research, Inc.
- Lucas, Robert E, Jr, 1990. "Supply-Side Economics: An Analytical Review," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 293-316, April.
- Gordon, Roger H, 1986. "Taxation of Investment and Savings in a World Economy," American Economic Review, American Economic Association, vol. 76(5), pages 1086-1102, December.
- Dixit, Avinash, 1985. "Tax policy in open economies," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 6, pages 313-374 Elsevier. Full references (including those not matched with items on IDEAS)