Capital income taxation and the current account in a small open economy

Iwamoto, Yasushi; Shibata, Akihisa

doi:10.1016/0261-5606(91)90001-z

Cited by 10 publications

(10 citation statements)

References 14 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…To illustrate, consider the model in Iwamoto and Shibata (1991) of a small open economy which faces a given world interest rate, r. In the absence of taxes, owners of capital invest up to the point where the marginal product of capital, F k , equals the world interest rate. That is, F k =r is the arbitrage condition for all investors.…”

Section: -The Residence Principlementioning

confidence: 99%

Globalisation, Tax Competition and the Harmonisation of Corporate Tax Rates in Europe: A Case of Killing the Patient to Cure the Disease?

2008

View full text Add to dashboard Cite

This paper surveys the literature on tax competition, and uses it to analyse current European proposals to harmonise corporate tax rates. It begins, in the course of Section One, by introducing the phenomenon of international tax competition, and illustrates, with the use of secondary research, the reality of the regulatory 'race to the bottom'. Section Two, however, demonstrates the harmful consequences of tax competition -with reference to the immobile factors of production -and makes obvious the necessity of effective intervention. Section Three then introduces and evaluates the calibre of the current proposals to tackle tax competition through collusion and harmonisation, and concludes negatively in the process. As illustrated in this discussion, any efforts to harmonise corporate taxes above the international equilibrium will not only fail to solve the problem at hand, but will exacerbate them, and may even serve to undermine and destabilise the political Union. Section Four then introduce an alternative solution to the problem -in the form of the residence principle -and Section Five concludes.

show abstract

Section: -The Residence Principlementioning

confidence: 99%

Globalisation, Tax Competition and the Harmonisation of Corporate Tax Rates in Europe: A Case of Killing the Patient to Cure the Disease?

2008

View full text Add to dashboard Cite

show abstract

“…For example, Summers (1988) points out that a residence‐based tax can be regarded as a saving tax and a source‐based tax as an investment tax 2 . Using overlapping generations models of a small open economy, Iwamoto and Shibata (1991) and Bovenberg (1992) show that a rise in the residence‐based tax rate leads the country to a current account deficit while an increase in the source‐based tax rate makes the country run a current account surplus. Moreover, there are several two‐country studies on this issue such as Sorensen (1990) and Ihori (1991).…”

Section: Introductionmentioning

confidence: 99%

International Asset Trade, Capital Income Taxation, and Specialization Patterns

Futagami

Kaneko

Ono

et al. 2008

J Public Economic Theory

Self Cite

View full text Add to dashboard Cite

This paper constructs a small economy version of dynamic Heckscher-Ohlin models with overlapping generations and analyzes effects of capital income taxation on the specialization pattern of the country. It is shown that once international asset trade is allowed, in the presence of international technological asymmetries, a small country eventually leads to perfect specialization in our overlapping generations model. It is also shown that the residence-based tax has no effect on the specialization pattern while the source-based tax has a negative effect on capital accumulation and thereby it can affect the specialization pattern of the small country. Copyright � 2008 Wiley Periodicals, Inc..

show abstract

“…In the case where foreign-asset holding is not allowed, including the closedeconomy case, a saving tax is equivalent to an investment tax since people as 18 Dependent upon the values of technological, preference and population parameters, the changes in specialization patterns mentioned in proposition 2 may not occur even under a sufficiently large change in the investment tax. For example, if L f /L h is very large, country f cannot perfectly specialize in the capital-intensive sector and hence only case (iii) is valid.…”

Section: Saving Taxmentioning

confidence: 99%

“…18 Proposition 2. An increase in an investment tax of country h leads the case of country h's imperfect specialization and country f's specialization in the capital-intensive sector to the case of country h's specialization in the labor-intensive sector and country f's specialization in the capital-intensive sector.…”

Section: Investment Taxmentioning

confidence: 99%

“…These two tax principles can be regarded as saving and investment taxation respectively, as shown by Summers (1988) and Giovannini (1990). 5 Comparing these two principles in overlapping generations models of a small open economy, Iwamoto and Shibata (1991) and Bovenberg (1992) show that a rise in the residence-based tax rate leads the country to a current account deficit while an increase in the source-based tax rate makes the country run a current account surplus. Sorensen (1990) and Ihori (1991) use two-country models with capital mobility and show that a rise in the residence tax of the home country reduces capital stock in both countries while a rise in the source tax decreases capital stock in the home country but increases it in the foreign country.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Capital Income Taxation and Specialization Patterns: Investment Tax vs. Saving Tax

Ono

Shibata

2006

SSRN Journal

Self Cite

View full text Add to dashboard Cite

Unless free international lending/borrowing is allowed, domestic saving equals domestic investment and hence saving and investment taxes have the identical effect, as is the case in a closed-economy context. However, if it is allowed, households can accumulate foreign assets besides domestic capital and hence saving and investment are separated, causing the two taxes to have different effects. Using a two-sector growth model, we show that the two taxes generate completely different effects on industrial structure. The investment tax always shrinks the capital-intensive sector whereas the saving tax may well expand it.

show abstract

Capital income taxation and the current account in a small open economy

Cited by 10 publications

References 14 publications

Globalisation, Tax Competition and the Harmonisation of Corporate Tax Rates in Europe: A Case of Killing the Patient to Cure the Disease?

Globalisation, Tax Competition and the Harmonisation of Corporate Tax Rates in Europe: A Case of Killing the Patient to Cure the Disease?

International Asset Trade, Capital Income Taxation, and Specialization Patterns

Capital Income Taxation and Specialization Patterns: Investment Tax vs. Saving Tax

Contact Info

Product

Resources

About