The International Income Taxation of Portfolio Debt in the Presence of Bi-directional Capital Flows

Written by : Ewen McCann and Tim Edgar Abstract – A country’s net flow of capital consists of simultaneously occurring imports and exports. Because a tax on the income from capital imports affects the quantity of capital exports and vice versa, tax policies toward inbound and outbound capital should be jointly formulated in order to avoid distortion of these bi-directional flows. For a small open economy, welfare- efficient local capital…