Witholding Taxes and the Cost of Public Debt

February 1, 1994

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Format: Chicago

Harry Huizinga. Witholding Taxes and the Cost of Public Debt, (USA: International Monetary Fund, 1994) accessed November 12, 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

Several industrialized countries impose withholding taxes on public interest accruing to nonresidents. This paper examines the international incidence of such withholding taxes by estimating to what extent these taxes raise the cost of government borrowing. It is found that the pretax interest rate is most sensitive to the tax withheld on Japanese investors. In particular, the gross-up is about half of this tax, which suggests that about half is returned to the investor in the form of foreign tax credits. The extent of the gross-up rises over the 1989-93 period, which indicates that in recent years foreign tax credits have been available to a lesser extent.

Subject: Income tax systems, Interest tax, Public debt, Tax allowances, Taxes, Withholding tax

Keywords: Cost of funds, Global, Income tax systems, Interest tax, International withholding tax rate, Nonresident withholding tax rate, Nonresident withholding taxes, Tax allowances, T-bill interest rates, Withholding tax, Withholding tax tax rate, WP

Publication Details

Pages:

22
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1994/018
Stock No:

WPIEA0181994
ISBN:

9781451843606
ISSN:

1018-5941

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