Taxation and the External Wealth of Nations: Evidence from Bilateral Portfolio Holdings

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

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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
Publication statusPublished - 28 Oct 2019

Publication series

NameCentER Discussion Paper


  • Asset allocation
  • capital income taxation
  • foreign portfolio investment


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