The corporate income tax in an open economy

The paper begins with a brief review of the distortion literature, stressing its relation to the general equilibrium consequences of the corporate income tax. The consequences for international trade of the distortions associated with the tax are then examined, and among other things it is found that trade could reduce welfare. Finally, the implications of trade for the incidence question are examined, and it is shown that whether labor or capital bears the burden of the tax depends entirely on whether the tax is imposed in the labor-intensive or the capital-intensive industry.