Article thumbnail

International tax arbitrage, financial parity conditions and preferential capital gains taxation

By Frank Strobel

Abstract

Using a finite-horizon general equilibrium model with uncertainty and money, we characterize situations where tax arbitrage opportunities may arise for international portfolio investors in an economy with heterogeneous capital income taxation when interest income and capital gains/losses are taxed differentially for some agents. We derive tax-modified uncovered interest parity conditions, Fisher conditions and forward prices similar to the no-tax ones, but augmented by tax-induced 'risk-premium' terms; covered interest parity and Fisher conditions remain unaffected by the introduction of capital income taxes as we bound tax-based arbitrage without restricting arbitrage per se.

DOI identifier: 10.1080/14697680500040470
OAI identifier:
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://www.tandfonline.com/doi... (external link)

  • To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.

    Suggested articles