Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/175717
Authors: 
Baumann, Ursel
Dieppe, Alistair
Dizioli, Allan Gloe
Year of Publication: 
2017
Series/Report no.: 
ECB Working Paper 2093
Abstract: 
Members of the US House of Representatives have proposed a major overhaul of the US corporate tax system, the so-called "destination-based border-adjusted cash-flow tax" (DBCFT). The literature on the economic implications and spillovers of such a DBCFT is scarce. This paper aims to provide a comprehensive analysis of the mechanics of such a tax, its macroeconomic implications as well as its global spillovers using a fully structural global multi-country model. Our results suggest that the short term macroeconomic impact of the reform would depend primarily on how permanent agents perceive the policy to be. Robustness scenarios show that the magnitude of the short term impact will also depend on the extent to which exporters are reimbursed by their domestic costs; what categories of goods are excluded from the reform; how the government uses the revenues generated by the border adjusted tax; and the pricing system used by exporters. Moreover, global spillovers will depend on how easy it is to replace imported goods by domestic production; whether US trading partners retaliate, and how financial markets in emerging economies react. If there is disequilibrium in relative prices in the short term, global economic activity spillovers could be strongly negative and world trade could decline substantially.
Subjects: 
Fiscal policy
International business cycle
Spillovers model based analysis
JEL: 
C68
E47
F41
F44
F62
O41
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-2815-1
Document Type: 
Working Paper
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