Tax Competition and Foreign Capital
University of Oregon Economics Working Paper No. 2001-15
34 Pages Posted: 17 Oct 2003
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: Suggested Citation
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