پرش تعرفه ای سرمایه گذاری خارجی و مالیات بر سرمایه

This paper reconsiders the welfare effects of ‘tariff jumping’ direct investment if mobile capital is subjected to taxation. In contrast to the conventional wisdom, the receiving country may in this case gain from the incremental inflow of capital, as this diverts tax revenues from the rest of the world. In the case of perfect capital mobility, this possibility becomes a certainty. Our argument provides one rationale for a small country to levy a distorting tariff in a second best world in which capital taxes already exist.

We conclude that, in the presence of capital taxation, tariff-induced (‘tariff jumping’) FDI may be beneficial to the economy, rather than harmful, as is conventionally argued. This beneficial outcome is a possibility in the case of an incremental capital inflow and becomes a certainty in the case of perfect capital mobility. The beneficial outcome relies on a ‘beggar thy neighbour’ effect, i.e., exploiting the fiscal externality. Given that all countries tax capital, an inflow redirects tax revenues to the capital receiving country at the expense of other countries’ revenues. Our argument, therefore, provides a second best rationale for the existence of tariffs in a world with capital taxation.