Taxation and the External Wealth of Nations

Evidence from Bilateral Portfolio Holdings

Harry Huizinga, Maximilian Todtenhaupt, Johannes Voget, W.B. Wagner

Research output: Working paperDiscussion paperOther research output

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Abstract

This paper examines the impact of capital income taxation on the composition of foreign portfolio investment. Studying bilateral portfolio positions among a sample of 37 countries over the period 2001-2015, we find that capital gains and dividend taxation reduce the share of equities in foreign investments, while interest taxation increases this share. The results suggest that domestic capital income taxation affects the worldwide asset allocation of domestic investors. The estimated tax sensitivities imply a significant increase in country’s external wealth following a tax policy change that stimulates investors to hold higher-yielding equity investments.
Original languageEnglish
Place of PublicationTilburg
PublisherCentER, Center for Economic Research
Number of pages53
Volume2019-029
Publication statusPublished - 28 Oct 2019

Publication series

NameCentER Discussion Paper
Volume2019-029

Fingerprint

Equity
Capital income taxation
Investors
Wealth
Taxation
Bilateral
Tax policy
Policy change
Asset allocation
Tax
Foreign investment
Dividends
Foreign portfolio investment
Capital gains

Keywords

  • Asset allocation
  • capital income taxation
  • foreign portfolio investment

Cite this

Huizinga, H., Todtenhaupt, M., Voget, J., & Wagner, W. B. (2019). Taxation and the External Wealth of Nations: Evidence from Bilateral Portfolio Holdings. (CentER Discussion Paper; Vol. 2019-029). Tilburg: CentER, Center for Economic Research.
Huizinga, Harry ; Todtenhaupt, Maximilian ; Voget, Johannes ; Wagner, W.B. / Taxation and the External Wealth of Nations : Evidence from Bilateral Portfolio Holdings. Tilburg : CentER, Center for Economic Research, 2019. (CentER Discussion Paper).
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Huizinga, H, Todtenhaupt, M, Voget, J & Wagner, WB 2019 'Taxation and the External Wealth of Nations: Evidence from Bilateral Portfolio Holdings' CentER Discussion Paper, vol. 2019-029, CentER, Center for Economic Research, Tilburg.

Taxation and the External Wealth of Nations : Evidence from Bilateral Portfolio Holdings. / Huizinga, Harry; Todtenhaupt, Maximilian; Voget, Johannes; Wagner, W.B.

Tilburg : CentER, Center for Economic Research, 2019. (CentER Discussion Paper; Vol. 2019-029).

Research output: Working paperDiscussion paperOther research output

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AB - This paper examines the impact of capital income taxation on the composition of foreign portfolio investment. Studying bilateral portfolio positions among a sample of 37 countries over the period 2001-2015, we find that capital gains and dividend taxation reduce the share of equities in foreign investments, while interest taxation increases this share. The results suggest that domestic capital income taxation affects the worldwide asset allocation of domestic investors. The estimated tax sensitivities imply a significant increase in country’s external wealth following a tax policy change that stimulates investors to hold higher-yielding equity investments.

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Huizinga H, Todtenhaupt M, Voget J, Wagner WB. Taxation and the External Wealth of Nations: Evidence from Bilateral Portfolio Holdings. Tilburg: CentER, Center for Economic Research. 2019 Oct 28. (CentER Discussion Paper).