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A Note on the Taxation of International Capital Income Flows

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  • NEIL BRUCE

Abstract

Seemingly persuasive arguments can be made to suggest that income from foreign‐owned capital should be taxed by a small open economy and that it should not be taxed I show that the case for taxing foreign capital income as part of an ‘optimal’ tax scheme rests on the assumption that tax rates on other forms of income are not set optimally. In particular, if economic profit is not fully taxed, a tax on foreign capital income is desirable. If all tax rates are set optimally, foreign capital income should not be taxed by the capital‐importing country.

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  • Neil Bruce, 1992. "A Note on the Taxation of International Capital Income Flows," The Economic Record, The Economic Society of Australia, vol. 68(3), pages 217-221, September.
    • Handle: RePEc:bla:ecorec:v:68:y:1992:i:3:p:217-221
    DOI: 10.1111/j.1475-4932.1992.tb01767.x
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    1. repec:bla:ecorec:v:62:y:1986:i:177:p:208-14 is not listed on IDEAS
    2. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production: I--Production Efficiency," American Economic Review, American Economic Association, vol. 61(1), pages 8-27, March.
    3. Christopher C. Findlay, 1986. "Optimal Taxation of International Income Flows," The Economic Record, The Economic Society of Australia, vol. 62(2), pages 208-214, June.
    4. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production II: Tax Rules," American Economic Review, American Economic Association, vol. 61(3), pages 261-278, June.
    5. Bond, Eric W & Samuelson, Larry, 1989. "Strategic Behaviour and the Rules for International Taxation of Capital," Economic Journal, Royal Economic Society, vol. 99(398), pages 1099-1111, December.
    6. G. D. A. MacDougall, 1960. "THE BENEFITS and COSTS OF PRIVATE INVESTMENT FROM ABROAD: A THEORETICAL APPROACH," The Economic Record, The Economic Society of Australia, vol. 36(73), pages 13-35, March.
    7. Gordon, Roger H, 1986. "Taxation of Investment and Savings in a World Economy," American Economic Review, American Economic Association, vol. 76(5), pages 1086-1102, December.
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    Cited by:

    1. Eggert, Wolfgang, 1997. "Capital tax competition with three tax instruments," Discussion Papers, Series II 347, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    2. Mackie James & J. Rousslang Donald, 2000. "The Optimal Taxation of Income From International Investment: A Geometric Analysis," International Economic Journal, Taylor & Francis Journals, vol. 14(4), pages 77-86.
    3. Slemrod, Joel & Hansen, Carl & Procter, Roger, 1997. "The seesaw principle in international tax policy," Journal of Public Economics, Elsevier, vol. 65(2), pages 163-176, August.
    4. Yong Yang, 1998. "International Taxation When Domestic Distributional Policy is Constrained," International Economic Journal, Taylor & Francis Journals, vol. 12(1), pages 75-93.

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