IMF Working Papers

On Noncooperative Capital Income Taxation in Open Economies

By Kenneth Kletzer

August 1, 1990

Preview Citation

Format: Chicago

Kenneth Kletzer. On Noncooperative Capital Income Taxation in Open Economies, (USA: International Monetary Fund, 1990) accessed November 21, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper discusses the strategic use of capital income taxation and lump-sum fiscal policies for gaining national advantage in an integrated world capital market. Each fiscal authority seeks to maximize a social welfare function defined over the utilities of home country residents incorporating national redistributing objectives. A national optimum policy is to impose a non-discriminatory source-based capital income tax or subsidy along with an optimal lump-sum tax and transfer plan. Residence-based capital income taxes do not augment the set of lump-sum fiscal instruments, although both policies can be used to influence the world interest rate to national advantage, redistributing welfare internationally. When unrestricted lump-sum fiscal policies are unavailable, source-based capital income taxes may be needed to achieve distributional objectives, so that departures from global production efficiency can arise in a cooperative equilibrium.

Subject: Capital income, Capital income tax, Estate tax, Fiscal policy, Public sector

Keywords: Capital stock, Debtor country, Disp-formula id, Rate of interest, WP

Publication Details

  • Pages:

    40

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 1990/071

  • Stock No:

    WPIEA0711990

  • ISBN:

    9781451959710

  • ISSN:

    1018-5941

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