 Residence- and source-based capital taxation in open economies with infinitely-lived consumersTill Gross (), Paul Klein and Miltiadis Makris Journal of International Economics, 2020, vol. 127, issue C Abstract: In this paper we investigate tax competition in a neoclassical growth model where each country may use both residence- and source-based capital taxes. We show that both types of capital taxes are zero at any interior steady state, just as in a closed economy. For symmetric countries, and even for countries that differ only with respect to size and productivity, we prove analytically and verify numerically that the open-economy policies coincide exactly with the closed-economy policies in all time periods. For countries that are asymmetric in other dimensions, we find that source-based taxes are used to manipulate the intertemporal terms of trade in the short run. Either way, the fiscal externalities of source-based taxes vanish once residence-based taxes are allowed. Keywords: Residence principle; Capital tax competition; Dynamic optimal taxation; Open economy; Ramsey taxation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:127:y:2020:i:c:s0022199620300842 DOI: 10.1016/j.jinteco.2020.103369 Access Statistics for this article Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and RodrÃguez-Clare, Andrés More articles in Journal of International Economics from Elsevier |
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