Final answer:
Prohibition of double taxation in the United States is codified in the Constitution and altered by the 16th Amendment. Internationally, the concept faces challenges due to jurisdictional limitations and the proposal of Tobin taxes on capital flows. Regulation is employed by countries to manage the effects of international investments.
Step-by-step explanation:
The question concerns the prohibition of double taxation, both direct and indirect, at different levels of government in the United States. The 16th Amendment of the U.S. Constitution altered the provision that originally prohibited states from imposing direct taxes. This amendment granted Congress the power to impose a federal income tax. Additionally, to prevent economic imbalances between states, the Constitution bars states from taxing imports from other states or from preferring the ports of one state over another.
In an international context, this principle becomes complex due to the practical challenges of regulating financial flows among nations. While national governments can impose domestic taxes, they do not have authority over international ones. If a nation, such as the U.S., were to impose a Tobin tax - named after James Tobin, the Nobel laureate who proposed it - on foreign exchange transactions, entities based in less regulated jurisdictions like the Grand Caymans could bypass this tax, highlighting difficulties in taxing international capital movements in a global economy.
Tobin taxes could target all foreign exchange transactions or differentiate types of investments, such as taxing short-term portfolio investments while exempting long-term foreign direct investments. However, countries may also use regulations to control or inhibit certain types of foreign investments to manage the effects of capital flow in and out of the country.