International tax arbitrage via corporate income splitting

Satish Chand*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)


If capital for corporate finance was available from a common global pool and at zero transaction cost, then does after-tax arbitrage require harmonization of income tax rates across jurisdictions? This paper shows that the answer is in the negative. When a corporation has the choice of deciding the fraction of income that it distributes as dividends with the remainder held for future capitalization, then such choice brings about arbitrage in after-tax rates of return to investors facing a common pre-tax return but different rates of income taxes. Policy implications are drawn from this result.

Original languageEnglish
Pages (from-to)111-115
Number of pages5
JournalQuantitative Finance
Issue number2
Publication statusPublished - 2002


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