Capital Flight and Tax Competition: Are There Viable Solutions to Both Problems?

51 Pages Posted: 27 Apr 2000 Last revised: 12 Aug 2010

See all articles by Alberto Giovannini

Alberto Giovannini

Columbia University - Columbia Business School

James R. Hines Jr.

University of Michigan; NBER

Date Written: April 1990


This paper discusses a model corporate tax system based on the application of the residence principle. This tax system, while preserving national sovereignties, minimizes the distortions from international capital mobility. The paper is motivated by an analysis of European capital income tax systems, and of the distortions they might give rise to as obstacles to international capital flows diminish. The alternative system we analyze has two main properties: it exploits the territoriality of law enforcement, and allows countries to set the corporate tax rate - and the extent of double taxation of corporate income - independently from their partners. The paper concludes with some suggestive evidence of the potential revenue effects among European countries of this tax system.

Suggested Citation

Giovannini, Alberto and Hines, James Rodger, Capital Flight and Tax Competition: Are There Viable Solutions to Both Problems? (April 1990). NBER Working Paper No. w3333. Available at SSRN:

Alberto Giovannini (Contact Author)

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

James Rodger Hines

University of Michigan ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States


1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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