The Impact on Economic Growth of Direct Taxation of Profits Derived from Investments in a Simplified Multi-Jurisdictional System

Abstract

From a structural perspective, this article is divided into two parts. The first part deals with the perception of investments from global Investors at a macroeconomic level. In this respect, the goal is to assess the impact of the direct tax policies related to profits derived from investments on the attractiveness of a certain tax jurisdiction for potential global Investors. As a consequence, there is a need to determine if it is realistic to have an aggregate attractiveness within a simplified system of tax jurisdictions and, assuming that this is the case, what the impact on the global economic demand could be. The fundamental idea is to be able to measure and determine in a certain context the attractiveness of a certain simplified system which, with specific limitations and assumptions, could potentially represent a more complex context. What needs to be verified by the single tax jurisdictions is whether there are new ways to increase the propensity to invest through a proper use of the instrument of direct taxation in connection with the profits derived from investments. In summary, the purpose is to verify what link exists between direct taxation and investments and then to see if it is possible to find an aggregate value that could potentially be included within a simplified global economic demand equation. The second part of the article has the objective of analyzing the benefit to a single tax jurisdiction of having several direct tax rates related to the profits derived from different types of investment. It is interesting to highlight that with the implementation of diversified direct tax jurisdictions for investments, the investment opportunities for the potential Global Investor might increase and, as a consequence, the investments themselves might also increase as the system’s total aggregate attractiveness would increase.