Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/75656
Authors: 
Fuest, Clemens
Huber, Bernd
Year of Publication: 
2000
Series/Report no.: 
CESifo Working Paper 348
Abstract: 
This paper analyses the optimal taxation of dividends and other types of income from portfolio investment. We show that, in an open economy, it is not desirable to offer double taxation relief for dividends paid by domestic firms to domestic households. This result holds for fairly general utility functions. The reason is that the marginal shareholder in domestic firms is a foreign investor. This implies that the level of real investment is not affected by the taxation of domestic dividend income at the household level. A reduction of the tax burden on dividends is therefore merely an undesirable subsidy on domestic asset holdings. Our results also extend the literature on the optimal taxation of risky asset income in general.
Subjects: 
Dividends
international taxation
portfolio investment
Document Type: 
Working Paper

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