Tax Policies in Open Economies.

international taxation;foreign direct investment;tax competition;firm heterogeneity;Economics;Business and Economics;Social Sciences;Economics

Sharma, Rishi R.Slemrod, Joel B ;

University of Michigan

关键词: international taxation;    foreign direct investment;    tax competition;    firm heterogeneity;    Economics;    Business and Economics;    Social Sciences;    Economics;   

Others  :  https://deepblue.lib.umich.edu/bitstream/handle/2027.42/133433/rishirs_1.pdf?sequence=1&isAllowed=y

瑞士|英语

来源: The Illinois Digital Environment for Access to Learning and Scholarship

【 摘 要 】

This dissertation consists of three papers that use economic theory to study tax policies in open economies. The first paper shows that small countries can have incentives to tax inbound FDI even in a setting with perfect competition and free entry. While investors make no aggregate profits worldwide due to free entry, they make taxable profits in foreign production locations because their investment costs are partly incurred in their home country. These profits are not perfectly mobile because a firm;;s productivity varies across locations. Consequently, the host country does not bear the entire burden of a tax on foreign investors and this gives rise to an incentive to impose taxes. The second paper starts by noting that most countries impose taxes on foreign investors while also having in place targeted subsidies and tax incentives designed to attract them. The paper shows that such a policy can be optimal from the standpoint of a host country. The government has an incentive to tax inframarginal firms because they are relatively immobile. It also has an incentive to subsidize marginal firms because the economic activity generated by such a subsidy can increase domestic wages in excess of the fiscal cost of the subsidy. These tax and subsidy policies improve host country welfare but are distortionary from a global standpoint. This analysis is thus able to provide an explanation for why tax coordination efforts can simultaneously entail reduced taxes and reduced subsidies on foreign firms. The third paper shows that the presence of inframarginal exporters is an independent reason for a positive optimal tariff. To demonstrate this clearly, I develop a perfectly competitive model of international trade where due to fixed costs of exporting and firm heterogeneity, some firms are inframarginal in their decision to export to a market. In this setting, despite the fact that there are no pre-existing distortions, even a small importing country that has no world market power has an incentive to impose tariffs. Tariffs are optimal because they allow the importing country to indirectly tax a portion of the exporting rents earned by foreign firms.