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| Author: | Bond, E. W. |
| Title: | Optimal tax and tariff policies with tax credits |
| Journal: | Journal of International Economics
1991 : MAY, VOL. 30:3-4, p. 317-329 |
| Index terms: | TARIFFS TRADE TAXATION TAX CREDITS CAPITAL TRANSFER TAX PRODUCTION SUBSIDIES |
| Language: | eng |
| Abstract: | The optimal trade and tax policy combinations for a small country are examined. A model is presented in which the rest of the world follows a policy allowing tax credits for tax payments to foreign countries. For a capital-importing country, a tax on capital equal to the source country tax rate (to capture tax revenue) combined with a subsidy to encourage capital imports is the optimal policy. Results are also derived for cases in which only one of the instruments can be varied. For a capital-exporting country that cannot reduce its capital tax rate, a subsidy to the sector using exported capital is desirable. The results suggest a shift from the use of tax rates to trade tools or production subsidies. |
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