Destination- and origin-based taxation under international capital mobility

This paper analyzes the macroeconomic effects of origin-based and destination-based taxes in a small open economy with international capital mobility and overlapping generations. In contrast to origin-based production taxes, destination-and origin-based consumption taxes do not distort the international allocation of capital. Nevertheless, the origin and destination principles are typically not equivalent due to different impacts on the intergenerational and international distribution of resources.