Retarding Short-Term Capital Inflows Through withholding Tax

Author/Editor:

Howell H Zee

Publication Date:

February 1, 2000

Electronic Access:

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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 proposes a price-based measure to mitigate the destabilizing impact of the volatility of global capital movements on the domestic economy of a country pursuing sound economic policies. The measure is a withholding tax on all private capital inflows, with a credit and refund provision that operates within the administrative framework of the existing domestic tax system to relieve noncapital inflows from the tax. This withholding tax, which is substantially more difficult to evade than the much-discussed alternative of imposing non-remunerated reserve requirements, can be implemented with little additional costs to the taxpayers and the tax authorities.

Series:

Working Paper No. 2000/040

Subject:

Balance of payments Capital flows Capital inflows Financial transaction tax Income and capital gains taxes National accounts Personal income Taxes

English

Publication Date:

February 1, 2000

ISBN/ISSN:

9781451845969/1018-5941

Stock No:

WPIEA0402000

Pages:

13

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