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Destination Based Cash Flow Taxation
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Book Synopsis Revenue Implications of Destination-Based Cash-Flow Taxation by : Shafik Hebous
Download or read book Revenue Implications of Destination-Based Cash-Flow Taxation written by Shafik Hebous and published by International Monetary Fund. This book was released on 2019-01-15 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: We estimate the revenue implications of a Destination Based Cash Flow Tax (DBCFT) for 80 countries. On a global average, DBCFT revenues under unchanged tax rates would remain similar to the existing corporate income tax (CIT) revenue, but with sizable redistribution of revenue across countries. Countries are more likely to gain revenue if they have trade deficits, are not reliant on the resource sector, and/or—perhaps surprisingly—are developing economies. DBCFT revenues tend to be more volatile than CIT revenues. Moreover, we consider the revenue losses resulting from spillovers in case of unilateral implementation of a DBCFT. Results suggest that these spillover effects are sizeable if the adopting country is large and globally integrated. These spillovers generate strong revenue-based incentives for many—but not all—other countries to follow the DBCFT adoption.
Book Synopsis Destination-Based Cash-Flow Taxation by : Alan J. Auerbach
Download or read book Destination-Based Cash-Flow Taxation written by Alan J. Auerbach and published by . This book was released on 2016 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents, analyses, and further develops the idea of a destination-based cash-flow tax (DBCFT). Its purpose is expositional: to describe the DBCFT, how it might work, what its effects would be and some of the challenges that its implementation would face. The paper starts by introducing the basic mechanics of the DBCFT before evaluating it against five criteria: economic efficiency, robustness to avoidance and evasion, ease of administration, fairness and stability. It does so both for the case of universal adoption by all countries and the more plausible case of unilateral adoption. The paper then looks closely at the application of DBCFT treatment to the financial sector, which is a familiar problem under the VAT but has been little considered under the DBCFT. Finally, the paper sets out some core implementation issues, and how they might be addressed. It also compares the implementation of a DBCFT with the economically equivalent reform option that introduces a broad-based, uniform rate VAT (or achieves the same effect through an existing VAT), and reduces taxes on payroll by the same proportion.
Book Synopsis A Destination-Based Allowance for Corporate Equity by : Shafik Hebous
Download or read book A Destination-Based Allowance for Corporate Equity written by Shafik Hebous and published by International Monetary Fund. This book was released on 2018-11-08 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: Following renewed academic and policy interest in the destination-based principle for taxing profits—particularly through a destination-based cash flow tax (DBCFT)—this paper studies other forms of efficient destination-based taxes. Specifically, it analyzes the Destination-Based Allowance for Corporate Equity (DBACE) and Allowance for Corporate Capital (DBACC). It describes adjustments that are required to turn an origin into a destination-based versions of these taxes. These include adjustments to capital and equity, which are additional to the border adjustments needed under a DBCFT. The paper finds that the DBACC and DBACE reduce profit shifting and tax competition, but cannot fully eliminate them, with the DBACE more sensitve than the DBACC. Overall, given the potential major political cost of switching from an origin to a destination-based tax system, we conclude that advantages of the DBCFT are likely to outweigh the transitional advantages of the DBACE/DBACC.
Book Synopsis Corporate Tax Reform: From Income to Cash Flow Taxes by : Benjamin Carton
Download or read book Corporate Tax Reform: From Income to Cash Flow Taxes written by Benjamin Carton and published by International Monetary Fund. This book was released on 2019-01-16 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses a multi-region, forward-looking, DSGE model to estimate the macroeconomic impact of a tax reform that replaces a corporate income tax (CIT) with a destination-based cash-flow tax (DBCFT). Two key channels are at play. The first channel is the shift from an income tax to a cash-flow tax. This channel induces the corporate sector to invest more, boosting long-run potential output, GDP and consumption, but crowding out consumption in the short run as households save to build up the capital stock. The second channel is the shift from a taxable base that comprises domestic and foreign revenues, to one where only domestic revenues enter. This leads to an appreciation of the currency to offset the competitiveness boost afforded by the tax and maintain domestic investment-saving equilibrium. The paper demonstrates that spillover effects from the tax reform are positive in the long run as other countries’ exports benefit from additional investment in the country undertaking the reform and other countries’ domestic demand benefits from improved terms of trade. The paper also shows that there are substantial benefits when all countries undertake the reform. Finally, the paper demonstrates that in the presence of financial frictions, corporate debt declines under the tax reform as firms are no longer able to deduct interest expenses from their profits. In this case, the tax shifting results in an increase in the corporate risk premia, a near-term decline in output, and a smaller long-run increase in GDP.
Book Synopsis Taxing Profit in a Global Economy by : Michael P. Devereux
Download or read book Taxing Profit in a Global Economy written by Michael P. Devereux and published by Oxford University Press. This book was released on 2020-09-29 with total page 401 pages. Available in PDF, EPUB and Kindle. Book excerpt: The international tax system is in dire need of reform. It allows multinational companies to shift profits to low tax jurisdictions and thus reduce their global effective tax rates. A major international project, launched in 2013, aimed to fix the system, but failed to seriously analyse the fundamental aims and rationales for the taxation of multinationals' profit, and in particular where profit should be taxed. As this project nears its completion, it is becomingincreasingly clear that the fundamental structural weaknesses in the system will remain. This book, produced by a group of economists and lawyers, adopts a different approach and starts from first principles in order to generate an international tax system fit for the 21st century. This approach examines fundamental issues of principle and practice in the taxation of business profit and the allocation of taxing rights over such profit amongst countries, paying attention to the interests and circumstances of advanced and developing countries. Once this conceptual framework is developed, the book evaluates the existing system and potential reform options against it. A number of reform options are considered, ranging from those requiring marginal change to radically different systems. Some options have been discussed widely. Others, particularly Residual Profit Split systems and a Destination Based Cash-Flow Tax, are more innovative and have been developed at some length and in depth for the first time in this book. Their common feature is that they assign taxing rights partly/fully to the location of relatively immobile factors: shareholders or consumers.
Book Synopsis Unilateral Introduction of Destination Based Cash Flow Taxation by : Johannes Becker
Download or read book Unilateral Introduction of Destination Based Cash Flow Taxation written by Johannes Becker and published by . This book was released on 2018 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the unilateral introduction of a destination-based corporate cash-flow tax system (DBT), as recently proposed by Auerbach and Devereux (AEJ Policy 2018). We show that, first, the DBT rate is decision-neutral only if the source-tax country makes the DBT payments deductible from its tax base. Second, a unilateral DBT introduction is, in many aspects, equivalent to completely abolishing the corporate tax and, instead, taxing domestic investors based upon their worldwide profit income, net of foreign taxes and on accrual. In this sense, the DBT is actually a pure residence based tax. This implies that, from a foreign investor's perspective, the DBT country is like a zero-rate tax haven and has the same gravitational power on taxable (and shiftable) profits and economic activity. The location of profit and activity within its borders is, however, without any fiscal value for the DBT country. Third, the introduction of a DBT system reduces national income. Finally, the DBT country can only individually benefit from its new tax system if public goods provision is substantially increased.
Book Synopsis A Destination-Based Allowance for Corporate Equity by : Shafik Hebous
Download or read book A Destination-Based Allowance for Corporate Equity written by Shafik Hebous and published by International Monetary Fund. This book was released on 2018-11-08 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: Following renewed academic and policy interest in the destination-based principle for taxing profits—particularly through a destination-based cash flow tax (DBCFT)—this paper studies other forms of efficient destination-based taxes. Specifically, it analyzes the Destination-Based Allowance for Corporate Equity (DBACE) and Allowance for Corporate Capital (DBACC). It describes adjustments that are required to turn an origin into a destination-based versions of these taxes. These include adjustments to capital and equity, which are additional to the border adjustments needed under a DBCFT. The paper finds that the DBACC and DBACE reduce profit shifting and tax competition, but cannot fully eliminate them, with the DBACE more sensitve than the DBACC. Overall, given the potential major political cost of switching from an origin to a destination-based tax system, we conclude that advantages of the DBCFT are likely to outweigh the transitional advantages of the DBACE/DBACC.
Book Synopsis No Business Taxation Without Model Representation by : Benjamin Carton
Download or read book No Business Taxation Without Model Representation written by Benjamin Carton and published by International Monetary Fund. This book was released on 2017-11-17 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Global Integrated Monetary and Fiscal model (GIMF) is a multi-region, forward-looking, DSGE model developed at the International Monetary Fund for policy analysis and international economic research. This paper documents the incorporation of corporate income, cash-flow and destination based cash-flow taxes into the model. The analysis presented considers the transmission mechanism of these taxes and details how financial frictions interact with each of the taxes.
Book Synopsis Identical Twins? Destination-Based Cash-Flow Taxes Versus Consumption Taxes with Payroll Subsidies by : Benjamin Carton
Download or read book Identical Twins? Destination-Based Cash-Flow Taxes Versus Consumption Taxes with Payroll Subsidies written by Benjamin Carton and published by International Monetary Fund. This book was released on 2017-12-14 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Global Integrated Monetary and Fiscal model (GIMF) is a multi-region, forward-looking, DSGE model developed by the Economic Modeling Division of the IMF for policy analysis and international economic research. This paper uses GIMF to illustrate when a destination-based cash-flow tax is equivalent to a combination of a consumption tax and a labor subsidy, as the latter combination have been advocated as proxies for the implementation of destination-based cash-flow taxes. The paper documents the conditions under which both types of taxes are identical and how the equivalence in terms of the real economy and tax revenue responses can be broken, namely after the introduction of finitely lived consumers that value government debt as net wealth (real economy) and the introduction of untaxed government expenditure (tax revenue).
Book Synopsis Unilateral Introduction of Destination-based Cash-flow Taxation by : Johannes Becker
Download or read book Unilateral Introduction of Destination-based Cash-flow Taxation written by Johannes Becker and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The article analyses the unilateral introduction of a destination-based corporate cash-flow tax system (DBT), as proposed by Auerbach and Devereux (AEJ Policy 2018). The authors show that, first, the DBT rate is decision-neutral only if the source tax country makes the DBT payments deductible from its taxbase. Second, a unilateral DBT introduction is, in many aspects, equivalent to completely abolishing the corporate tax and, instead, taxing domestic investors based upon their worldwide profit income, net of foreign taxes and on accrual. In this sense, the DBT is actually a pure residence-based tax. This implies that, from a foreign investor's perspective, the DBT country is like a zero rate tax haven and has the same gravitational power on taxable profits and economic activity. Third, the location of profit and activity within its borders is, however, without any fiscal value for the DBT country. Fourth, the introduction of a DBT system reduces national income. Fifth, the DBT country can only individually benefit from its new tax system if public goods provision is substantially increased. Finally, it is optimal to complement a unilateral DBT system with a source-based tax.
Book Synopsis The Potential Distributive Effects of the Proposed Destination Based Cash Flow Tax (DBCFT). by : David Herzig
Download or read book The Potential Distributive Effects of the Proposed Destination Based Cash Flow Tax (DBCFT). written by David Herzig and published by . This book was released on 2017 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The House GOP Blueprint for tax reform is the most ambitious corporate tax reform since the 1930s. It cuts business tax rates and allows immediate expensing of capital outlays. It accomplishes these goals by replacing the current corporate income tax which taxes profits to a destination based cash flow tax that taxes cash flow. The tax is a move from origin or production based to destination or consumption based. As Alan Auerbach said rather than figuring out “how do you measure income...with cash flow you just follow the money.” The cash flow tax is designed to accomplish a couple big goals. First, stop the gaming done by companies like Facebook to reduce their corporate tax burden. Second, encourage equity investment over borrowing. Finally, encourage exports while increasing the tax burden on imports. To put it mildly, the plan has caused quite a reaction. This essay considers the GOP proposals under the lens of whether the new corporate tax will disproportionately harm the lower boundaries. The new corporate income tax is being marketed as more progressive than the current corporate income tax because it will shift the tax from normal returns to supernormal returns, in other words from labor to capital. Since capital tends to be the wealthy; the tax will redistribute from the rich to the poor. In order to examine the progressivity of the proposal, I first discuss the proper comparative baseline for determining progressivity. Since the proposed tax, at first blush, appears to increase the deficit, the primary question is can the current structure ever be progressive. By cutting other social programs or raising the deficit to pay for the tax is not progressive. Then, assuming that the tax could be neutral in costs because rates can change, the essay concludes that the proposed corporate tax still fails short of being considered progressive. The distortions that continue to exist cause too much uncertainty that the distributive effects would benefit anyone but the owners of capital.
Book Synopsis Some Thoughts on the Relationship Between the Destination-Based Cash Flow Tax and VAT. by : Wolfgang Schoen
Download or read book Some Thoughts on the Relationship Between the Destination-Based Cash Flow Tax and VAT. written by Wolfgang Schoen and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years, a move for destination-based taxes on business profits has become visible around the world. The most revolutionary and sophisticated model for international tax reform is the 'Destination-Based Cash Flow Tax' which is meant to replace the traditional corporate income tax and to shift international taxing rights with regard to business profits from the country of origin to the country of destination. This justifies an attempt to compare the DBCFT with VAT - as VAT is levied on a destination basis as well. This chapter analyses the conceptual differences and similarities between a DBCFT and a VAT from an economic and a legal perspective. It raises the issue of whether VAT and DBCFT are different when it comes to their respective compatibility with WTO law. Finally, the chapter discusses policy options for the US and the EU.
Book Synopsis Exploring Residual Profit Allocation by : Sebastian Beer
Download or read book Exploring Residual Profit Allocation written by Sebastian Beer and published by International Monetary Fund. This book was released on 2020-02-28 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: Schemes of residual profit allocation (RPA) tax multinationals by allocating their ‘routine’ profits to countries in which their activities take place and sharing their remaining ‘residual’ profit across countries on some formulaic basis. They have recently and rapidly come to prominence in policy discussions, yet almost nothing is known about their impact on revenue, investment and efficiency. This paper explores these issues, conceptually and empirically. It finds residual profits to be substantial, but concentrated in a relatively few MNEs, headquartered in few countries. The impact on tax revenue of reallocating excess profits under RPA, while adverse for investment hubs, appears beneficial for lower income countries even when the formula allocates by destination-based sales. The impact on investment incentives is ambiguous and specific both to countries and MNE groups; only if the rate of tax on routine profits is low does aggregate efficiency seem likely to increase.
Book Synopsis Demystifying the Destination-Based Cash-Flow Tax by : Alan J. Auerbach
Download or read book Demystifying the Destination-Based Cash-Flow Tax written by Alan J. Auerbach and published by . This book was released on 2017 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper describes the Destination-Based Cash-Flow Tax (DBCFT), as proposed in 2016 by Republicans in the US House of Representatives, and its potential economic effects. As a new approach and a major departure from the existing business tax system, the DBCFT and its motivation have been poorly understood by many in government, the business community, and the economics profession.
Book Synopsis Border Adjustments in the Destination Based Cash Flow Tax : a Bold Proposal with Unanswered Questions by : K.L. Kellar
Download or read book Border Adjustments in the Destination Based Cash Flow Tax : a Bold Proposal with Unanswered Questions written by K.L. Kellar and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This article comments on the Republicans' proposal for a destination based cash flow tax which has the intention to simplify and move the tax system toward a consumption based model. The article focuses on selected legal, economic and policy aspects of one component of the destination based cash flow tax, so called border adjustments. Furthermore, the authors discuss the lack of clearness with regard to the application of the new system to the financial sector, digital goods, services and cloud computing. They also take into consideration the transition rules which would facilitate the conversion to a different system, and the need for businesses to switch from income tax accounting to cash flow accounting. Finally they state that before the Proposal is adopted, far more economic and policy analysis and design is needed, and the attention must be given to details concerning mechanics, implementation and enforcement.
Book Synopsis Cash-flow Tax by : Parthasarathi Shome
Download or read book Cash-flow Tax written by Parthasarathi Shome and published by . This book was released on 1993 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Progressive Consumption Taxation by : Robert Carroll
Download or read book Progressive Consumption Taxation written by Robert Carroll and published by Rowman & Littlefield. This book was released on 2012 with total page 224 pages. Available in PDF, EPUB and Kindle. Book excerpt: The authors observe that consumption taxation is superior to income taxation because it does not penalize saving and investment and propose that the U.S. income tax system be completely replaced by a progressive consumption tax. They argue that the X tax, developed by the late David Bradford, offers the best form of progressive consumption taxation for the United States and outline concrete proposals for the X tax's treatment of numerous specific economic issues.
