If capital for corporate finance was available from a common global pool and at zero transaction cost, then does after-tax arbitrage require harmonization of income tax rates across jurisdictions? This paper shows that the answer is in the negative. When a corporation has the choice of deciding the fraction of income that it distributes as dividends with the remainder held for future capitalization, then such choice brings about arbitrage in after-tax rates of return to investors facing a common pre-tax return but different rates of income taxes. Policy implications are drawn from this result.