Foreign-Investment Tax and Tariff Policies in Developing Countries |
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Authors: | Chi-Chur Chao,& Eden S.H. Yu |
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Affiliation: | Oregon State University, Corvallis, OR 97330 and Chinese University of Hong Kong, Shatin, Hong Kong,;Chinese University of Hong Kong, Shatin, Hong Kong |
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Abstract: | 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. |
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