Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/76449 
Authors: 
Year of Publication: 
2003
Series/Report no.: 
CESifo Working Paper No. 997
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
In a previous paper I described how the tax design called the X Tax would facilitate an international tax system free of many of the complexities and avoidance opportunities plaguing the existing international tax regime and also have neutrality properties generally deemed desirable. A choice must, however, be made between two basic treatments of transborder business transactions - the origin and destination principles. The destination-principle approach sidesteps the need to identify arm's length terms of transborder transactions between related business entities - the transfer-pricing problem. This serious problem remains in the origin-principle approach, which, however, presents fewer challenges of monitoring the flow of goods and services across borders, obviates what I call the tourism problem whereby people can reduce their taxes by consuming in a low-tax jurisdiction and, arguably most important, avoids transition effects associated with introduction of the tax and subsequent tax rate changes that occur in the destination approach. In this paper I explore possible special rules for transborder transactions between related parties in an origin-based system to eliminate the transferpricing problem.
Document Type: 
Working Paper
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