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Taxation of Financial Capital in a Globalized Environment: The Role of Withholding Taxes

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  • Zee, Howell H.

Abstract

This paper assesses the merits and limitations of raising withholding taxes at source as a policy measure to address the increasingly serious problem of tax evasion connected with cross-border income flows from portfolio investment in the present globalized environment. Such taxes are effective in capturing passive income flows in an administratively simple way, but generate a number of distortions and give rise to international revenue redistribution and other spillover effects. On balance, however, the paper concludes that raising withholding taxes should be seriously considered in a multilateral framework to combat tax evasion.

Suggested Citation

  • Zee, Howell H., 1998. "Taxation of Financial Capital in a Globalized Environment: The Role of Withholding Taxes," National Tax Journal, National Tax Association;National Tax Journal, vol. 51(3), pages 587-599, September.
    • Handle: RePEc:ntj:journl:v:51:y:1998:i:3:p:587-99
    DOI: 10.1086/NTJ41789354
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    References listed on IDEAS

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    1. Huizinga, Harry, 1996. "The incidence of interest withholding taxes: Evidence from the LDC loan market," Journal of Public Economics, Elsevier, vol. 59(3), pages 435-451, March.
    2. Harry Huizinga, 1994. "International interest withholding taxation: Prospects for a common European policy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 1(3), pages 277-291, October.
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    Cited by:

    1. Şahin AKKAYA & Ferda Yerdelen TATOĞLU & Ufuk BAKKAL, 2021. "Fiscal competition and public expenditure composition in the era of globalization: Panel data analysis," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(1(626), S), pages 167-182, Spring.
    2. FitzGerald, Valpy, 2002. "International tax cooperation and capital mobility," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    3. Huizinga, Harry & Nicodeme, Gaetan, 2004. "Are international deposits tax-driven," Journal of Public Economics, Elsevier, vol. 88(6), pages 1093-1118, June.
    4. Ganghof, Steffen, 1999. "Adjusting national tax policy to economic internationalization: Strategies and outcomes," MPIfG Discussion Paper 99/6, Max Planck Institute for the Study of Societies.

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