Destination-Based Taxation in the House Republican Blueprint

11 Pages Posted: 30 Aug 2016 Last revised: 9 Jan 2017

See all articles by Wei Cui

Wei Cui

University of British Columbia (UBC), Faculty of Law

Date Written: July 28, 2016


The House Republican Task Force on Tax Reform released its Blueprint for tax reform in June 2016, at the center of which is a destination-based cash-flow tax (DBCFT) to replace the current federal income tax on corporations. The House GOP Blueprint represents the first time that the DBCFT has been promoted by political leaders. Initial commentators have stressed the capacity of such a tax (if adopted in the U.S.) to reduce U.S. companies’ incentives for international tax planning and profit shifting, and to allow the U.S. to “leapfrog to the front of the pack” in its tax competitiveness.

This essay discusses three key issues for understanding the DBCFT. First, I argue that we should not see the “perennial question” concerning border adjustments required by the tax as being about WTO-compatibility. Instead, the question should be whether we truly understand the DCFT’s potential impact on trade, aside from WTO legal concerns. In reality, key questions about the DBCFT’s distortionary trade effects have not been answered. Second, I examine how the loss carry-forward aspect of the Blueprint interacts with border adjustments, and argue that it creates a first-order implementation issue. Third, I show that the extension of destination-based taxation to non-corporate entities simultaneously (i) is necessary, (ii) produces no efficiency gains relative to the status quo, and (iii) renders pass-through taxation obsolete.

The implementation issues for the DBCFT I highlight would not arise if the U.S. were to adopt a VAT instead. I conclude by comparing the DBCFT with the VAT in respect of the issue of progressivity, and considering how other countries would respond to a U.S. DBCFT.

Keywords: International Tax Reform, Border Adjustments, WTO and Taxation, House Republican Task Force on Tax Reform, Corporate Taxation, Cash-Flow Taxation, DBCFT

JEL Classification: F13, H25, K34

Suggested Citation

Cui, Wei, Destination-Based Taxation in the House Republican Blueprint (July 28, 2016). 152 Tax Notes 1419 (September 5, 2016), Available at SSRN: or

Wei Cui (Contact Author)

University of British Columbia (UBC), Faculty of Law ( email )

1822 East Mall
Vancouver, BC V6T1Z1

HOME PAGE: http://

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
PlumX Metrics