The law of one price imposes an implicit tax on assets in low-tax jurisdictions.

Question

Quizplus · Accepted Answer

The law of one price states that an asset should trade at the same price in all markets, regardless of location. This means that if an asset is cheaper in a low-tax jurisdiction, investors will buy it there and sell it in a high-tax jurisdiction, driving up the price in the low-tax jurisdiction until it is the same as in the high-tax jurisdiction. This effectively imposes an implicit tax on assets in low-tax jurisdictions, as investors must pay the difference between the price in the low-tax jurisdiction and the price in the high-tax jurisdiction.

The Law of One Price Imposes an Implicit Tax on Assets