International tax abitrage via corporate income splitting

Satish Chand

International and Development Economics Working Papers from International and Development Economics

Abstract: If capital for corporate finance was available from a common global pool and at zero transaction cost, then does after-tax arbitrage require harmonisation of income tax rates across jurisdictions? This paper shows that the answer is in the negative. When a corporation has the choice in deciding the fraction of income that it distributes as dividends with the remainder held for future capitalisation, then such choice brings about arbitrage in after-tax rates of return to investors facing a common pre-tax return but different rates of income taxes. Policy implications are drawn from this result.

JEL-codes: H25 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2002
New Economics Papers: this item is included in nep-acc and nep-pbe
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:idc:wpaper:idec02-1

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