Revenue Implications Of Destination Based Cash Flow Taxation

Author : Shafik Hebous,Mr.Alexander D Klemm,Saila Stausholm
Publisher : International Monetary Fund
Page : 35 pages
File Size : 51,5 Mb
Release : 2019-01-15
Category : Business & Economics
ISBN : 9781484392935

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Revenue Implications of Destination-Based Cash-Flow Taxation by Shafik Hebous,Mr.Alexander D Klemm,Saila Stausholm Pdf

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.

Author : Benjamin Carton,Emilio Fernández Corugedo,Mr.Benjamin L Hunt
Publisher : International Monetary Fund
Page : 34 pages
File Size : 55,6 Mb
Release : 2019-01-16
Category : Business & Economics
ISBN : 9781484390085

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Corporate Tax Reform: From Income to Cash Flow Taxes by Benjamin Carton,Emilio Fernández Corugedo,Mr.Benjamin L Hunt Pdf

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.

Author : Shafik Hebous,Mr.Alexander D Klemm
Publisher : International Monetary Fund
Page : 26 pages
File Size : 52,7 Mb
Release : 2018-11-08
Category : Business & Economics
ISBN : 9781484384138

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A Destination-Based Allowance for Corporate Equity by Shafik Hebous,Mr.Alexander D Klemm Pdf

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.

Author : Benjamin Carton,Emilio Fernández Corugedo,Mr.Benjamin L Hunt
Publisher : International Monetary Fund
Page : 61 pages
File Size : 43,6 Mb
Release : 2017-11-17
Category : Business & Economics
ISBN : 9781484326015

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No Business Taxation Without Model Representation by Benjamin Carton,Emilio Fernández Corugedo,Mr.Benjamin L Hunt Pdf

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.

Author : Benjamin Carton,Emilio Fernández Corugedo,Mr.Benjamin L Hunt
Publisher : International Monetary Fund
Page : 37 pages
File Size : 52,6 Mb
Release : 2017-12-14
Category : Business & Economics
ISBN : 9781484332993

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Identical Twins? Destination-Based Cash-Flow Taxes Versus Consumption Taxes with Payroll Subsidies by Benjamin Carton,Emilio Fernández Corugedo,Mr.Benjamin L Hunt Pdf

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).

Author : Michael P. Devereux,Alan J. Auerbach,Michael Keen,Paul Oosterhuis,John Vella,Wolfgang Schön
Publisher : Oxford University Press
Page : 401 pages
File Size : 43,8 Mb
Release : 2020-09-29
Category : Business & Economics
ISBN : 9780198808060

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Taxing Profit in a Global Economy by Michael P. Devereux,Alan J. Auerbach,Michael Keen,Paul Oosterhuis,John Vella,Wolfgang Schön Pdf

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.

Author : Martin, Will
Publisher : Intl Food Policy Res Inst
Page : 28 pages
File Size : 45,6 Mb
Release : 2017-02-09
Category : Political Science
ISBN : 8210379456XXX

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Trade and economic impacts of destination-based corporate taxes by Martin, Will Pdf

Current US proposals for destination-based corporate taxes that effectively combine a value-added tax (VAT) and a wage subsidy raise important policy questions for countries considering them, and for their trading partners. This tax/subsidy package would not create trade barriers or export subsidies, and any changes in trade would result from the measures’ distributional consequences or short-run impacts on output. The package would leave business profits and rents untaxed, placing the burden of the tax entirely on consumers, with no offset from exchange rate appreciation. If anything, its introduction could cause a short-run real exchange rate depreciation. A key concern regarding this package is its small, volatile, and vulnerable revenue yield. At current US consumption and labor shares of gross domestic product (GDP), a 20 percent corporate cash-flow tax with a wage subsidy would generate only around 2 percent of GDP in revenues, a result that could be obtained with much less volatility from a 2.8 percent tax without the wage subsidy. Under the tax/subsidy regime, revenues would become negative if consumption and labor shares returned to their historical norms, requiring increases in other taxes. A 20 percent tax would raise consumer prices by up to 27 percent, taking into account state sales taxes, sharply cutting the living standards of people on fixed incomes. The average combined consumption tax rate of 33 percent would be the highest in the world and more than double the world-average VAT rate, creating incentives for avoidance and evasion.

Author : Jack M. Mintz,Jesus Seade
Publisher : World Bank Publications
Page : 50 pages
File Size : 45,7 Mb
Release : 1989
Category : Cash flow
ISBN : 8210379456XXX

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Cash Flow Or Income? by Jack M. Mintz,Jesus Seade Pdf

Author : Michael P. Devereux,Alan J. Auerbach,Michael Keen,Paul Oosterhuis,Wolfgang Schön,John Vella
Publisher : Oxford University Press
Page : 416 pages
File Size : 45,5 Mb
Release : 2021-01-21
Category : Law
ISBN : 9780192535573

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Taxing Profit in a Global Economy by Michael P. Devereux,Alan J. Auerbach,Michael Keen,Paul Oosterhuis,Wolfgang Schön,John Vella Pdf

This book undertakes a fundamental review of the existing international system of taxing business profit. It steps back from the current political debates on how to combat profit shifting and how taxing rights over the profits of the digitalized economy should be allocated. Instead, it starts from first principles to ask how we should evaluate a tax on business profit—and whether there is any good rationale for such a tax in the first place. It then goes on to evaluate the existing system and a number of alternatives that have been proposed. It argues that the existing system is fundamentally flawed, and that there is a need for radical reform. The key conclusion from the analysis is that there would be significant gains from a reform that moved the system towards taxing profit in the country in which a business made its sales to third parties. That conclusion informs two proposals that are put forward in detail and evaluated: the Residual Profit Allocation by Income (RPAI) and the Destination-based Cash Flow Tax (DBCFT). The book is authored by group of economists and lawyers—the Oxford International Tax Group, chaired by Michael P. Devereux. It draws insights from both economics and law—including economic theory, empirical evidence on the impact of taxes, and an examination of practical issues of implementation—to assess the existing system and to consider fundamental reforms. This book will be useful to tax policy makers, tax professionals, academics, and anyone interested in tax policy.

Author : Parthasarathi Shome
Publisher : Unknown
Page : 36 pages
File Size : 42,5 Mb
Release : 1993
Category : Cash flow
ISBN : UCSD:31822015536998

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Cash-flow Tax by Parthasarathi Shome Pdf

Author : Alan J. Auerbach
Publisher : Harvard University Press
Page : 142 pages
File Size : 40,5 Mb
Release : 1983
Category : Business & Economics
ISBN : 0674868455

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The Taxation of Capital Income by Alan J. Auerbach Pdf

This important contribution to tax analysis presents seven related theoretical essays that examine the effects of capital income taxation on the behavior of firms. It is divided into three sections, focusing on optimal tax design, firm financial policy, and inflation. Taken together, the essays demonstrate the powerful role taxes play in shaping the behavior of American corporations, and also provide insights into the difficult task of tax reform. Auerbach's results suggest policies the government might adopt to promote the optimal accumulation of capital. He examines the implications for capital taxation of discrepancies between nominal depreciation rates and real economic depreciation, and suggests appropriate rules of thumb for determining when capital taxation is neutral among alternative investment projects. He also makes important contributions to the debate over the integration of corporate and personal taxes on capital income and to the behavioral puzzle of why corporations pay dividends to their shareholders.

Author : Ms.Thornton Matheson,Patrick Petit
Publisher : International Monetary Fund
Page : 42 pages
File Size : 53,8 Mb
Release : 2017-11-15
Category : Business & Economics
ISBN : 9781484324981

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Taxing Telecommunications in Developing Countries by Ms.Thornton Matheson,Patrick Petit Pdf

Developing countries apply numerous sector-specific taxes to telecommunications, whose buoyant revenues and formal enterprises provide a convenient “tax handle”. This paper explores whether there is an economic rationale for sector-specific taxes on telecommunications and, if so, what form they should take to balance the competing goals of promoting connectivity and mobilizing revenues. A survey of the literature finds that limited telecoms competition likely creates rents that could efficiently be taxed. We propose a “pecking order” of sector-specific taxes that could be levied in addition to standard income and value-added taxes, based on capturing rents and minimizing distortions. Taxes that target possible economic rents or profits are preferable, but their administrative challenges may necessitate reliance on service excises at the cost of higher consumer prices and lower connectivity. Taxes on capital inputs and consumer access, which distort production and restrict network access, should be avoided; so should tax incentives, which are not needed to attract foreign capital to tap a local market.

Author : Sebastian Beer,Ruud A. de Mooij,Shafik Hebous,Mr.Michael Keen,Ms.Li Liu
Publisher : International Monetary Fund
Page : 51 pages
File Size : 51,7 Mb
Release : 2020-02-28
Category : Business & Economics
ISBN : 9781513528328

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Exploring Residual Profit Allocation by Sebastian Beer,Ruud A. de Mooij,Shafik Hebous,Mr.Michael Keen,Ms.Li Liu Pdf

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.

Author : David F. Bradford
Publisher : Unknown
Page : 80 pages
File Size : 48,9 Mb
Release : 2004
Category : Income tax
ISBN : UCSD:31822033211087

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The X Tax in the World Economy by David F. Bradford Pdf

"This paper considers the treatment of multinational business in the system known as an X Tax. The focus is on the choice between origin and destination treatments of transborder transactions. The destination-principle approach sidesteps the transferpricing problem. It remains in the origin-principle approach, which, however, presents fewer challenges of monitoring imports, obviates the tourism problem' whereby people can reduce their taxes by consuming in a low-tax jurisdiction and avoids transition effects associated with introduction of the tax and subsequent tax rate changes. The paper suggests special rules for transborder transactions between related parties to deal with the transfer-pricing problem"--NBER website

Author : Roger H. Gordon,Jeffrey K. MacKie-Mason
Publisher : Unknown
Page : 22 pages
File Size : 41,9 Mb
Release : 1994
Category : Corporations
ISBN : UCSD:31822016603938

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Why is There Corporate Taxation in a Small Open Economy? by Roger H. Gordon,Jeffrey K. MacKie-Mason Pdf

Several recent papers argue that corporate income taxes should not be used by small, open economies. With capital mobility, the burden of the tax falls on fixed factors (e.g., labor), and the tax system is more efficient if labor is taxed directly. However, corporate taxes not only exist but rates are roughly comparable with the top personal tax rates. Past models also forecast that multinationals should not invest in countries with low corporate tax rates, since the surtax they owe when profits are repatriated puts them at a competitive disadvantage. Yet such foreign direct investment is substantial. We suggest that the resolution of these puzzles may be found in the role of income shifting, both domestic (between the personal and corporate tax bases) and cross-border (through transfer pricing). Countries need cash-flow corporate taxes as a backstop to labor taxes to discourage individuals from converting their labor income into otherwise untaxed corporate income. We explore how these taxes can best be modified to deal as well with cross-border shifting.