Which of the following is will NOT reduce capital flight from source countries ?
Correct answer: B. higher taxes on capital gains
- A. dependable positive real interest rates
- B. higher taxes on capital gains
- C. more efficient state enterprises
- D. market liberalization
Explanation
Higher taxes on capital gains can encourage investors to move funds abroad or keep them outside the formal domestic system, so they may increase rather than reduce capital flight. Stable real returns, efficient enterprises and liberalized markets generally improve confidence and retain capital.
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