International Tax and Public Finance

, Volume 10, Issue 2, pp 127–145 | Cite as

Tax Competition and Foreign Capital

  • Ronald B. Davies
  • Thomas A. Gresik


This paper derives welfare equivalence of double taxation rules in a tax competition model with discriminatory home taxes and the ability to finance subsidiary operations with host country capital. For a more general model, we provide sufficient conditions on the number of host sectors and factors that support double-tax-rule equivalence. Examples violating these conditions help identify economic factors under which a home country has strict preferences over double taxation rules. If the home tax rate can influence host factor prices, the home country weakly prefers deductions over credits as in the pure-home-equity financing case.

tax competition double taxation foreign capital 


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Copyright information

© Kluwer Academic Publishers 2003

Authors and Affiliations

  • Ronald B. Davies
    • 1
  • Thomas A. Gresik
    • 2
  1. 1.University of OregonUSA
  2. 2.Mendoza College of BusinessUniversity of Notre DameNotre Dame

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