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Simple Rules for the Optimal Taxation of International Capital Income[Note 1. This paper forms part of the Human Capital and ...]
Author(s) -
Keen Michael,
Piekkola Hannu
Publication year - 1997
Publication title -
scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/1467-9442.00073
Subject(s) - economics , simple (philosophy) , capital (architecture) , lump sum , investment (military) , capital income , income tax , principal (computer security) , international taxation , microeconomics , rest (music) , set (abstract data type) , mathematical economics , macroeconomics , econometrics , tax reform , public economics , payment , finance , computer science , philosophy , epistemology , programming language , operating system , medicine , cardiology , archaeology , politics , political science , law , history
In this paper we reconcile and extend previous results on the collectively optimal taxation of international investment income. The “weighted average” rule of Horst (1980), for example, is shown to rest on unattractive assumptions on the set of instruments available, ruling out any need for distorting taxes. The principal contribution is to establish a new and strikingly simple weighted average rule — encompassing the other key result in this area — for the general case in which lump‐sum taxes are unavailable, the ability to tax pure profits is perhaps restricted and distorting taxes on both domestic and border‐crossing capital income are optimally deployed.