Exemption vs. Credit Method in International Double Taxation Treaties |
| |
Authors: | Thomas Dickescheid |
| |
Affiliation: | (1) Department of Economics, University of Dortmund, 44221 Dortmund, Germany |
| |
Abstract: | This paper examines the choice of international double taxation relief methods by two small countries that mutually exchange foreign direct investment. At the first stage, each country chooses between the exemption and the credit method (as prescribed by the OECD model treaty) and at the second stage, each country sets nationally optimal non-discriminatory capital tax rates. It is shown that in the subgame perfect equilibrium both countries choose the exemption method. Mutual application of the exemption method is also shown to yield the highest welfare for each country. While the tax export effect generally induces both countries to choose inefficiently high tax rates, this effect is weakest when both countries exempt foreign earned profits from domestic taxation. |
| |
Keywords: | international taxation double taxation relief tax competition tax export |
本文献已被 SpringerLink 等数据库收录! |
|