International tax arbitrage via corporate income splitting
Date
2002
Authors
Chand, Satish
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Volume Title
Publisher
Crawford School of Economics and Government, The Australian National University
Abstract
If capital for corporate finance was available from a common global pool and at zero
transaction cost, then does after-tax arbitrage require harmonisation of income tax
rates across jurisdictions? This paper shows that the answer is in the negative. When
a corporation has the choice in deciding the fraction of income that it distributes as
dividends with the remainder held for future capitalisation, then such choice brings
about arbitrage in after-tax rates of return to investors facing a common pre-tax return
but different rates of income taxes. Policy implications are drawn from this result.
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Citation
Chand, S. (2002). International tax arbitrage via corporate income splitting. International and Development Economics Paper 02-1. Canberra, ACT: Crawford School of Economics and Government, The Australian National University.
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Working/Technical Paper
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Open Access
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