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Business and Economics > Corporate Taxation

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Cover IMF Working Papers
Capital Account Liberalization and Corporate Taxes
Mr. Ben Lockwood
,
Michael B. Devereux
, and
Michela Redoano
This paper studies whether exchange controls, particularly on the capital account, affect the choice of corporate tax rates, using a panel of 21 OECD countries over the period 1983-99. It builds on existing literature by (1) using a unique dataset with several different measures of the corporate tax rate calculated from the actual parameters of the tax systems, and (2i) allowing exchange controls to affect the intensity of strategic interaction between countries in setting taxes, as well as the levels of tax they choose. We find some evidence that (1) the level of a country’s tax, other things equal, is lowered by a unilateral liberalization of exchange controls; and (2) that strategic interaction in taxsetting between countries is increased by liberalization. These effects are stronger if the country is a high-tax one and if the tax is the statutory or effective average one. There is also evidence that countries’ own tax rates are reduced by liberalization of exchange controls in other countries.
Keywords:
WP; exchange controls; Capital controls; tax competition; globalization; corporate tax tax rate; competition literature; measures Tit; interaction effect; measure CMF; capital mobility; home country tax rate; Corporate taxes; Corporate income tax; Exchange restrictions; Average effective tax rate
Cover IMF Working Papers
A Pecking Order Theory of Capital Inflows and International Tax Principles
Chi-Wa Yuen
,
Assaf Razin
, and
Efraim Sadka
Even though financial markets today show a high degree of integration, the world capital market is still far from the textbook story of high capital mobility. The purpose of this paper is to highlight key sources of market failure in the context of international capital flows and to provide guidelines for efficient tax structure in the presence of capital market imperfections. The analysis distinguishes three types of international capital flows: foreign portfolio debt investment, foreign portfolio equity investment, and foreign direct investment. The paper emphasizes the efficiency of a nonuniform tax treatment of the various vehicles of international capital flows.
Keywords:
WP; rate of interest; economic value; representative firm; solvent firm; capital investment; n firm; borrowing firm; J firm; rate of return; Foreign direct investment; Corporate income tax; Capital flows; Capital income tax; Capital inflows; Western Europe
Cover IMF Working Papers
Tax Incentives and International Capital Flows: The Case of the United States and Japan
International Monetary Fund
This paper explores how the tax treatment of investment and savings affects international capital flows as well as national and global welfare. Focusing on portfolio investment, it evaluates the international effects of capital income taxes in the United States and Japan. During the 1980s, these taxes encouraged capital flows to the United States both by favoring investment in that country and by harming the country’s relative savings performance. The paper concludes that the internationalization of financial markets calls for a careful study of the international implications of domestic tax policies.
Keywords:
WP; cost of capital; inflation rate; rate of return; closed economy; tax wedge; after-tax return; market return; capital flow; raise savings; Tax wedge; Corporate income tax; Investment incentives; Capital flows; Capital income tax; Global