Withholding Taxes and the Cost of Public Debt

22 Pages Posted: 15 Feb 2006

See all articles by Harry Huizinga

Harry Huizinga

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR)

Date Written: February 1994

Abstract

Several industrialized countries impose withholding taxes on public interest accruing to nonresidents. This paper examines the international incidence of such withholding taxes by estimating to what extent these taxes raise the cost of government borrowing. It is found that the pretax interest rate is most sensitive to the tax withheld on Japanese investors. In particular, the gross-up is about half of this tax, which suggests that about half is returned to the investor in the form of foreign tax credits. The extent of the gross-up rises over the 1989-93 period, which indicates that in recent years foreign tax credits have been available to a lesser extent.

JEL Classification: F21, F23, H25, H87

Suggested Citation

Huizinga, Harry, Withholding Taxes and the Cost of Public Debt (February 1994). IMF Working Paper No. 94/18, Available at SSRN: https://ssrn.com/abstract=883445

Harry Huizinga (Contact Author)

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2623 (Phone)
+31 13 466 3042 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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