NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Can Direct and Indirect Taxes Be Added for International Comparisons of Competitiveness?

Hans-Werner Sinn

NBER Working Paper No. 3263 (Also Reprint No. r1541)
Issued in February 1990
NBER Program(s):   PE

While it is usually argued that direct and indirect taxes should be added for meaningful international comparisons of country competitiveness, this paper argues that the opposite may be true. It is possible that a country with a high value-added tax needs a high capital income tax to maintain its international competitiveness and vice verca. Which view is correct depends on which combination of the origin, destination, source and residence principles' prevail and whether or not accelerated depreciation is allowed. Using a Heckscher-Ohlin model with international capital movements the paper studies the relevant alternatives in detail.

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Document Object Identifier (DOI): 10.3386/w3263

Published: Reforming Capital Income Taxation, edited by Horst Siebert, Tubingen, Germany: J.C.B. Mohr (Paul Siebeck), 1990, pp. 47-65.

 
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