A European Perspective on the US Plans for a Destination Based Cash Flow Tax

Becker, Johannes; Englisch, Joachim

doi:10.2139/ssrn.2924313

Cited by 5 publications

(2 citation statements)

References 18 publications

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“…Baumann, Dieppe, and Dizioli (2017) look at the macroeconomic implications of DBCFT, but do not consider the role of multinational firms and hence they also do not analyze transfer pricing behavior. Becker and Englisch (2017) raise the issue of transfer price distortions in a non-technical discussion of the original U.S. tax reform proposal with regard to WTO compliance. One defense that has been offered in the literature for setting aside transfer price issues is that the transfer price effects "would operate to the detriment of the rest of the world, not that of the adopting country."…”

Section: Introductionmentioning

confidence: 99%

Unilateral tax reform: Border adjusted taxes, cash flow taxes, and transfer pricing

Bond

Gresik

2020

Journal of Public Economics

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We study the economic effects of unilateral adoption of corporate tax policies that include destination-based taxes and/or cash ow taxes in a heterogeneous agent model in which multinational firms can endogenously shift income between countries using transfer prices. Standard pass through arguments no longer apply because of the income shifting behavior of multinationals. Over or under-pass through will affect domestic consumer prices charged by multinational firms and will distort the decision of international businesses to outsource intermediate goods or to produce them in a foreign subsidiary. The welfare of the adopting country can decrease both with the adoption of destination-based taxes and the adoption of cash ow taxes. For a country with sufficiently large export markets that can optimally adjust its corporate tax rate on domestic earnings, unilaterally adopting cash ow taxation with full destination-based rate adjustments will reduce welfare. JEL-Codes: F230, H210, H250, H260.

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Section: Introductionmentioning

confidence: 99%

Unilateral tax reform: Border adjusted taxes, cash flow taxes, and transfer pricing

Bond

Gresik

2020

Journal of Public Economics

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“…See Tax Reform Task Force (2017). 2 For instance, seeAuerbach and Holtz-Eakin (2016),Auerbach et al (2017),Becker and Englisch (2017), and Benzell, Kotlikoff and LaGarda (2017).3 Cash flow taxation also has implications for how debt and interest payments are taxed. We abstract from these issues in this paper.…”

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confidence: 99%

Can Destination-Based Cash Flow Taxes Arise in Equilibrium?

Gresik

Bond

2021

SSRN Journal

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We examine the effects of unilateral changes in a country's tax parameters in a two country model when both countries are part of a destination-based cash flow taxation (DBCFT) system. We consider deviations from a globally efficient DBCFT equilibrium by allowing each country to vary its corporate tax rate, degree of taxation of capital income, and level of border adjustment. We decompose the effect of policy changes into fiscal effects and price effects, and show that regardless of the similarity between the two countries, at least one country has an incentive to move toward taxation of capital income. If countries are identical, each has an incentive to move toward source-based taxation. In contrast, changes in corporate tax rates have neither fiscal or price effects, and thus can be set unilaterally. Our results show that an international agreement to establish multilateral DBCFT requires a commitment mechanism to prevent deviations from cash flow taxation and full border adjustments.

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Unilateral introduction of destination-based cash-flow taxation

Becker

Englisch

2019

Int Tax Public Finance

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A European Perspective on the US Plans for a Destination Based Cash Flow Tax

Cited by 5 publications

References 18 publications

Unilateral tax reform: Border adjusted taxes, cash flow taxes, and transfer pricing

Unilateral tax reform: Border adjusted taxes, cash flow taxes, and transfer pricing

Can Destination-Based Cash Flow Taxes Arise in Equilibrium?

Unilateral introduction of destination-based cash-flow taxation

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