Why Capital Income Taxes Survive in Open Economies: The Role of Multinational Firms |
| |
Authors: | Clemens Fuest Bernd Huber |
| |
Institution: | (1) Department of Economics, University of Cologne, Albertus Magnus-Platz, D-50923 Köln;(2) Department of Economics, University of Munich, Ludwigstr. 28, VG., III, D-80539 München |
| |
Abstract: | This paper discusses the role of multinational firms and double taxation treaties for corporate income taxation in open economies. We show that it is optimal for a small open economy to levy positive corporate income taxes if multinational firms are taxed according to the full taxation after deduction system or the foreign tax credit system. Positive corporate taxes also occur in the asymmetric case where some countries apply the exemption system and others apply the tax credit system. If all countries apply the exemption system, the optimal corporate income tax is zero. We also show that, under tax competition, corporate income taxes are not necessarily too low from the perspective of the economy as a whole. While the undertaxation result is confirmed for the case of the exemption system, tax rates may also be inefficiently high if the deduction or the credit systems are applied. |
| |
Keywords: | corporate income taxation tax competition multinational firms double taxation treaties |
本文献已被 SpringerLink 等数据库收录! |
|