<p>As we all know tax decreases the income of an individual thus an increase in tax rate would decrease his(country's) income and thus imports will fall as import are a function of home country's GDP.
Thus now net exports have increased, as in goods are flowing out of the country that it is flowing in the country.
Now we know current account and capital account are 2 faces of the same coin, thus a surplus in current account will lead a deficit in capital account i.e. money will start flowing out of the country.
As money will start flowing out of the country and if exchange rate is flexible and there perfect mobility in capital, the giving up of Home country currency will decrease its value in the international market. Which would then increase net exports and thus income.</p>

CC BY-SA 4.0
2023-05-30T10:56:46.317Z
2023-05-30T10:56:46.317Z
Aditya Agarwal
<p>I'm trying to figure out if a currency gets valued or devalued internatopnally if there is more taxation.</p>
<p>Looking at places like Dubai, id think itd get valued more on the basis that people would be more likely to buisness in that country; expanding the economy.</p>

<macroeconomics>
How does tax level of country effect the international value of a currency?
Brian
# How does tax level of country effect the international value of a currency?

(Asked by: username_0 on 2023-05-26)

I'm trying to figure out if a currency gets valued or devalued internatopnally if there is more taxation.

Looking at places like Dubai, id think itd get valued more on the basis that people would be more likely to buisness in that country; expanding the economy.

**Tags:** macroeconomics

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## 1 answers

### Answer by username_1 on 2023-05-30. Score: -1

As we all know tax decreases the income of an individual thus an increase in tax rate would decrease his(country's) income and thus imports will fall as import are a function of home country's GDP.
Thus now net exports have increased, as in goods are flowing out of the country that it is flowing in the country.
Now we know current account and capital account are 2 faces of the same coin, thus a surplus in current account will lead a deficit in capital account i.e. money will start flowing out of the country.
As money will start flowing out of the country and if exchange rate is flexible and there perfect mobility in capital, the giving up of Home country currency will decrease its value in the international market. Which would then increase net exports and thus income.


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