The incidence of interest withholding taxes: Evidence from the LDC loan markets

Taxation;Interest Rate

Real exchange rate misalignment and redistribution

Exchange Rate;Export;Income Distribution

The financing and taxation of U.S. direct investment abroad

The author examines the financing of U.S. direct investment abroad. Using a theoretical model, he first examines how home country investors can use debt finance to reduce their host country tax liability and to reduce the capital investment distortion attributable to foreign taxes. Empirically, U.S. affiliates are shown to use leverage in high tax environments and in situations where the affiliates face high foreign wage bills relative to assets. This confirms the notion that leverage can be used to ward off host country tax and wage pressures on the firm. The author examines what characteristics of foreign direct investment determine the average host country tax rate paid. Generally, the taxation of foreign direct investment is positively related to the size of the wage bill. Host countries appear to charge lower taxes in cases where U.S. direct investor abroad pay high wage bills to labor within the host country. Certain trends emerge from the data: there is a relative shift of U.S. direct investment abroad toward the industrial countries; debt finance of direct investment is becoming more important in industrial countries and less important in developing countries; and the tax benefits that industrialand developing countries get from U.S. affiliates, as measured by average income and payroll taxes, are waning. The downward trend in tax rates suggests an increased international competition to attract foreign direct investment. The reduction in average tax rates on U.S. investment abroad and the relative shift toward investment in industrial countries suggests a tougher climate ahead for developing countries that wish to attract foreign direct investment. One strategy for attracting foreign investment would be to deepen the domestic financial market so a multinational can attract additional lending capital in the host country itself. Another approach is local equity participation in foreign direct investment to lessen the incentives for host countries to tax foreign investments highly.Environmental Economics&Policies,Public Sector Economics&Finance,Banks&Banking Reform,International Terrorism&Counterterrorism,Economic Theory&Research

International trade and migration in the presence of sector-specific labor quality pricing distortions

In one of two sectors, there are labor quality pricing distortions in the sense that labor obtains the average rather than marginal product. This may be due to a failure on the part of employers to observe individual labor quality or due to an income redistributing union. Relatively low quality workers are in equilibrium employed in the sector characterized by average productivity wage setting. International differences in the quality distributions of the labor force are shown to be a source of comparative advantage and hence a determinant of international trade. The country that imports the good produced by relatively low quality workers may lose from international trade. Immigration by low quality workers may equally lower the welfare of a country's original inhabitants. As a result, a country generally benefits from restricting the immigration of very low quality workers.International Trade;Migration;international economics

Migration and income transfers in the presence of labor quality externalities

In this paper, a worker's productivity is assumed to depend on his own quality and on the average quality of other workers in the same country. The external effects associated with worker quality give rise to increasing returns to average worker quality. As a result, free migration generally reduces world output. Within each country, social benefits that induce low quality workers to leave the labor force can increase national income. Moreover, the operation of such a benefit scheme financed by a proportional income tax can increase everybody's net-of-tax income. The political economy of a system of transfers within a country is analyzed. In particular, the level of transfers is assumed to be determined by popular vote. In this setting, small migration flows can bring about large changes in transfer levels and in labor participation rates. The anticipation of migration generally reduces the level of transfers to the unemployed.Labour Market;Migration;Productivity;National Income;Quality;labour economics

National tax policies towards product-innovating multinational enterprises

Multinational Companies;Corporate Tax

The Dual Role of Money and Optimal Financial Taxes

This paper reconsiders the optimal taxation of money and other financial assets.The optimal tax formulae reflect that money provides liquidity services and is a saving vehicle.In fact, it is useful to reformulate the optimal tax problem to allow for separate taxes on the liquidity and saving functions of money.This reformulation allows one to better understand the original optimal tax problem.The possible optimality of a subsidy on borrowing, for instance, can be explained if it is noted that the theoretically correct measure of savings reflects that money as well as nonmonetary assets can serve as saving vehicles.money;savings;taxation

Time preference and international tax competition

Taxation;Capital Movements;Preferences;Models

The Taxation Implicit in Two-Tiered Exchange Rate Systems

A two-tiered exchange rate system can be interpreted as a set of separate taxes on money and other financial assets.If the official two-tiered exchange rate system coexists with a black market for foreign exchange, then there is an implicit taxation of international goods trade as well.This paper presents some evidence on the tax rates and tax revenues implicit in the exchange rate systems of the Bahamas (from 1978 to 1995), the Dominican Republic (from 1970 to 1984) and South Africa (from 1973 to 1995).Only the Bahamas appears to have received positive tax revenues from the implicit taxation of international capital flows, while only South Africa is estimated to have obtained positive tax revenues from the implicit taxation of international goods trade.taxation;exchange rate