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Capital income and profits taxation with foreign ownership of firms

Author

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  • Huizinga, H.P.

    (Tilburg University, Center For Economic Research)

  • Nielsen, S.B.

Abstract

This paper establishes in the simplest possible way optimal rules for capital income and profits taxation in the open economy with or without foreign ownership of doemstic firms. We show that if there are constraints on the feasibility of profits taxation, both saving and investment taxes generally enter the optimal tax package. If instead profits can be fully taxed, then source-based investment taxes vanish. If domestic firms are in part owned by foreigners, then source-based investment taxes can be used to shift income away from these to domestic citizens and they may even be used to finance lump sum transfers to domestic residents.
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Suggested Citation

  • Huizinga, H.P. & Nielsen, S.B., 1995. "Capital income and profits taxation with foreign ownership of firms," Discussion Paper 1995-82, Tilburg University, Center for Economic Research.
    • Handle: RePEc:tiu:tiucen:0831a769-305a-4194-82be-cbb4726d74a6
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    References listed on IDEAS

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    1. Roger H. Gordon & Jeffrey K. MacKie-Mason, 1995. "Why Is There Corporate Taxation in a Small Open Economy? The Role of Transfer Pricing and Income Shifting," NBER Chapters, in: The Effects of Taxation on Multinational Corporations, pages 67-94, National Bureau of Economic Research, Inc.
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    12. Huizinga, H.P., 1995. "The optimal taxation of savings and investment in an open economy," Other publications TiSEM c0a8ff76-e7aa-4d2e-9c51-3, Tilburg University, School of Economics and Management.
    13. Huizinga, Harry, 1995. "The optimal taxation of savings and investment in an open economy," Economics Letters, Elsevier, vol. 47(1), pages 59-62, January.
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