What Governments May Do: Policy Options
What Governments May Do: Policy Options
This chapter reviews various policy approaches to the taxation of international income and the deductibility of financing costs. It begins by considering tax policy objectives that a government may adopt and how this affects the international allocation of capital. This is followed by an analysis of outbound and inbound investment issues and the tax treatment of interest. It examines whether a country should fully tax foreign source profits on an accrual basis or exempt it with limitations on interest deductibility. A final section considers issues related to international cooperation in taxation, including the allocation of a harmonized tax base.
Keywords: international income, taxation, tax policy, capital allocation, harmonized tax base
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