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Foreign‐Investment Tax and Tariff Policies in Developing Countries
Author(s) -
Chao ChiChur,
Yu Eden S.H.
Publication year - 1997
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.00038
Subject(s) - tariff , economics , tax credit , subsidy , international economics , tax reform , ad valorem tax , value added tax , welfare , indirect tax , double taxation , capital (architecture) , monetary economics , macroeconomics , public economics , market economy , history , archaeology
In this paper we examine the welfare effects of tax on foreign capital and tariff policies for a small open economy with sectoral unemployment. The individually and jointly optimal tax and tariff rates in the absence or presence of international tax credits are derived. A subsidy on foreign capital coupled with a tariff can be jointly optimal when tax credits are absent in the source country. However, the capital subsidy policy may fail to hold when the foreign country follows a tax credit system.