Tax Competition and Foreign Capital

University of Oregon Economics Working Paper No. 2001-15

34 Pages Posted: 17 Oct 2003

See all articles by Ronald B. Davies

Ronald B. Davies

University College Dublin (UCD)

Thomas A. Gresik

University of Notre Dame - Department of Economics

Date Written: January 1, 2001

Abstract

This paper derives welfare equivalence of double taxation rules in a tax competition model with discriminatory home taxes and the ability to finance subsidiary operations with host country capital. For a more general model, we provide sufficient conditions on the number of host sectors and factors that support double-tax-rule equivalence. Examples violating these conditions help identify economic factors under which a home country's has strict preferences over double taxation rules. If the home tax rate can influence host factor prices, the home country weakly prefers deductions over credits as in the pure-homeequity financing case.

Keywords: tax competition, double taxation, foreign capital

JEL Classification: F21, F23, H25

Suggested Citation

Davies, Ronald B. and Gresik, Thomas A., Tax Competition and Foreign Capital (January 1, 2001). University of Oregon Economics Working Paper No. 2001-15, Available at SSRN: https://ssrn.com/abstract=445983 or http://dx.doi.org/10.2139/ssrn.445983

Ronald B. Davies (Contact Author)

University College Dublin (UCD) ( email )

Belfield
Belfield, Dublin 4 4
Ireland

Thomas A. Gresik

University of Notre Dame - Department of Economics ( email )

3060 Jenkins Nanovic Halls
University of Notre Dame
Notre Dame, IN 46556
United States