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International Capital Mobility and Tax Evasion

Author

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  • Giovannini, Alberto

Abstract

This paper studies the welfare effects of international investment to evade domestic taxes on domestic investment income. Capital mobility for tax evasion eliminates distortions in the intertemporal allocation of consumption, but introduces distortions in domestic production. Conversely, a regime where residents pay taxes on all investment income, domestic and foreign, introduces distortions in intertemporal consumption allocation, but leaves domestic production distortion-free. The relative magnitude of the interest elasticity of savings and the interest elasticity of domestic investment determines the welfare effects of capital movements for the purpose of tax evasion.

Suggested Citation

  • Giovannini, Alberto, 1988. "International Capital Mobility and Tax Evasion," CEPR Discussion Papers 231, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:231
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    Citations

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    Cited by:

    1. Joosung Jun, 1989. "U.S. Tax Policy and Direct Investment Abroad," NBER Working Papers 3049, National Bureau of Economic Research, Inc.
    2. Razin, A. & Sadka, E., 1989. "Capital Market Integration: Issues Of International Taxation," Papers 40-89, Tel Aviv.
    3. Assaf Razin & Efraim Sadka, 1992. "International Interactions between Tax Systems and Capital Flows," NBER Chapters, in: The Political Economy of Tax Reform, pages 9-30, National Bureau of Economic Research, Inc.
    4. Joosung Jun, 1990. "US Tax Policy and Direct Investment Abroad," NBER Chapters, in: Taxation in the Global Economy, pages 55-78, National Bureau of Economic Research, Inc.
    5. Alberto Giovannini & Martha de Melo, 1991. "Government Revenue from Financial Repression," NBER Working Papers 3604, National Bureau of Economic Research, Inc.
    6. Marcel Gérard, 2002. "Tax Competition, the Distribution of MNE's Ownership and the Wage Formation Process," CESifo Working Paper Series 631, CESifo.
    7. Correia, Isabel H., 1996. "Dynamic optimal taxation in small open economies," Journal of Economic Dynamics and Control, Elsevier, vol. 20(4), pages 691-708, April.

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