THE TAXATION OF EXPORT PROFITS

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Abstract
Many industrial countries tax export profits less heavily than domestic profits. Preferential taxation of manufactured exports originated in an era of fixed exchange rates as a means of defending the balance of payments. It can be viewed as part of the broader tendency to replace tariff barriers and capital controls with fiscal protection. Preferential tax treatment arises from several complex features of the tax law. An attempt is made to calculate the effect of these features on the tax cost of capital engaged in export production for several industrial countries. The results are compared with the tax cost of capital engaged in production for the domestic market.

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