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Dynamic inconsistency and preferential taxation of foreign capital

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  • Kaushal Kishore

    (University of Pretoria)

Abstract

In a two-period dynamic model in which a single country attempts to attract two large investors endowed with capital with varying rate of returns, we show that the result of Kishore and Roy (Econ Lett 124:88–92, 2014) that a country has incentives to commit to a non-preferential regime to circumvent a dynamic inconsistency problem does not hold. The tax revenue of the government may be higher under a preferential regime compared to a non-preferential regime.

Suggested Citation

  • Kaushal Kishore, 2017. "Dynamic inconsistency and preferential taxation of foreign capital," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(3), pages 381-396, June.
    • Handle: RePEc:kap:itaxpf:v:24:y:2017:i:3:d:10.1007_s10797-016-9423-2
    DOI: 10.1007/s10797-016-9423-2
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    References listed on IDEAS

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