Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/191388
Authors: 
Hebous, Shafik
Klemm, Alexander
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper No. 7363
Abstract: 
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 sensitive 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.
Subjects: 
destination-based taxation
ACE
ACC
JEL: 
H21
H25
Document Type: 
Working Paper

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