When capital is perfectly mobile across countries and labour is fixed, a source-based tax on capital both reduces and redistributes world income. We show that under plausible circumstances there always exists a country that benefits from introducing such a tax.

Why do capital taxes still exist in an integrated world economy? When capital is perfectly mobile across countries and labour is fixed, a source-based tax on capital both reduces and redistributes world income. In a simple general equilibrium model we show that under plausible circumstances...