IMF Working Papers

A Pecking Order Theory of Capital Inflows and International Tax Principles

By Chi-Wa Yuen, Assaf Razin, Efraim Sadka

April 1, 1996

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Chi-Wa Yuen, Assaf Razin, and Efraim Sadka. A Pecking Order Theory of Capital Inflows and International Tax Principles, (USA: International Monetary Fund, 1996) accessed November 23, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Even though financial markets today show a high degree of integration, the world capital market is still far from the textbook story of high capital mobility. The purpose of this paper is to highlight key sources of market failure in the context of international capital flows and to provide guidelines for efficient tax structure in the presence of capital market imperfections. The analysis distinguishes three types of international capital flows: foreign portfolio debt investment, foreign portfolio equity investment, and foreign direct investment. The paper emphasizes the efficiency of a nonuniform tax treatment of the various vehicles of international capital flows.

Subject: Balance of payments, Capital flows, Capital income tax, Capital inflows, Corporate income tax, Foreign direct investment, Taxes

Keywords: Borrowing firm, Capital flows, Capital income tax, Capital inflows, Capital investment, Corporate income tax, Economic value, Foreign direct investment, J firm, N firm, Rate of interest, Rate of return, Representative firm, Solvent firm, Western Europe, WP

Publication Details

  • Pages:

    28

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 1996/026

  • Stock No:

    WPIEA0261996

  • ISBN:

    9781451844337

  • ISSN:

    1018-5941

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