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Optimal tax on capital inflows discriminated by debt-risk profile

Julián Parra-Polanía () and Carmina Vargas ()

International Tax and Public Finance, 2015, vol. 22, issue 1, 102-119

Abstract: In this study, the optimal value of a tax on capital inflows is estimated so that private agents internalize the social costs of their borrowing decisions in an economy with financial constraints. A key feature of our model is that we provide a theoretical foundation to tax level differentiation by asset volatility. Using Colombian data for the 1996–2011 period (which includes the crisis of 1998–1999), we find the tax would be around 1.2 %. Copyright Springer Science+Business Media New York 2015

Keywords: Optimal tax; Capital flows; Externalities; Financial constraint; H23; D62; F34 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1007/s10797-013-9300-1

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