Sharing the Spoils: Taxing International Human Capital Flows

Authors: Mihir A. Desai¹; Devesh Kapur²; John McHale³

Source: International Tax and Public Finance, Volume 11, Number 5, September 2004 , pp. 663-693(31)

Publisher: Springer

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Abstract:

This paper argues that cross-border human capital flows from developing countries to developed countries over the next half-century will demand a new set of policy responses from developing countries. The paper examines the forces that are making immigration policies more skill-focused, the effect of both flows (emigration) and stocks (diasporas) on the source countries, and the range of taxation instruments available to source countries to manage the consequences of those flows. This paper emphasizes the example of India, a large source country for human capital flows, and the United States, an important destination for these human capital flows and an example of how a country can tax its citizens abroad. In combination, these examples point to the significant advantage to developing countries of potential tax schemes for managing the flows and stocks of citizens who reside abroad. Finally, this paper concludes with a research agenda for the many questions raised by the prospect of large flows of skilled workers and the policy alternatives, including tax instruments, available to source countries.

Keywords: migration; tax policy; brain drain; international taxation

Document Type: Research article

DOI: http://dx.doi.org/10.1023/B:ITAX.0000036696.58785.f9

Affiliations: 1: Harvard University and NBER, Soldiers Field Road, Boston, MA 02163., Email: mdesai@hbs.edu 2: Harvard University, Department of Government, Cambridge, MA 02138., Email: dkapur@latte.harvard.edu 3: Queen's University, Kingston, ON, Canada., Email: jmchale@business.queensu.ca

Publication date: 2004-09-01