Tax Incentives and International Capital Flows: The Case of the United States and Japan

International Monetary Fund

No 1989/005, IMF Working Papers from International Monetary Fund

Abstract: This paper explores how the tax treatment of investment and savings affects international capital flows as well as national and global welfare. Focusing on portfolio investment, it evaluates the international effects of capital income taxes in the United States and Japan. During the 1980s, these taxes encouraged capital flows to the United States both by favoring investment in that country and by harming the country’s relative savings performance. The paper concludes that the internationalization of financial markets calls for a careful study of the international implications of domestic tax policies.

Keywords: WP; cost of capital; inflation rate; rate of return; closed economy; tax wedge; after-tax return; market return; capital flow; raise savings; Tax wedge; Corporate income tax; Investment incentives; Capital flows; Capital income tax; Global (search for similar items in EconPapers)
Pages: 64
Date: 1989-01-01
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Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:1989/005

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