Destination-Based Cash Flow Taxation

Oxford University Centre for Business Taxation WP 17/01

100 Pages Posted: 13 Feb 2017  

Alan J. Auerbach

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Michael P. Devereux

Centre for Business Taxation, Oxford University; CESifo (Center for Economic Studies and Ifo Institute); Institute for Fiscal Studies (IFS); Centre for Economic Policy Research (CEPR); University of Oxford - Said Business School; University of Oxford - Said Business School

Michael Keen

International Monetary Fund (IMF) - Fiscal Affairs Department; CESifo (Center for Economic Studies and Ifo Institute); Institute for Fiscal Studies (IFS)

John Vella

Oxford University Centre for Business Taxation; University of Oxford - Faculty of Law

Date Written: February 6, 2017

Abstract

This paper presents, analyses, and further develops the idea of a destination-based cash-flow tax (DBCFT). Its purpose is expositional: to describe the DBCFT, how it might work, what its effects would be and some of the challenges that its implementation would face. The paper starts by introducing the basic mechanics of the DBCFT before evaluating it against five criteria: economic efficiency, robustness to avoidance and evasion, ease of administration, fairness and stability. It does so both for the case of universal adoption by all countries and the more plausible case of unilateral adoption. The paper then looks closely at the application of DBCFT treatment to the financial sector, which is a familiar problem under the VAT but has been little considered under the DBCFT. Finally, the paper sets out some core implementation issues, and how they might be addressed. It also compares the implementation of a DBCFT with the economically equivalent reform option that introduces a broad-based, uniform rate VAT (or achieves the same effect through an existing VAT), and reduces taxes on payroll by the same proportion.

Keywords: International Tax; Tax Reform; Cash Flow Tax; DBCFT; BEPS Destination-Based Cash Flow Taxation; Consumption Tax

JEL Classification: H20; H21; H22;H23: H25; H27

Suggested Citation

Auerbach, Alan J. and Devereux, Michael P. and Keen, Michael and Vella, John, Destination-Based Cash Flow Taxation (February 6, 2017). Oxford University Centre for Business Taxation WP 17/01. Available at SSRN: https://ssrn.com/abstract=2908158 or http://dx.doi.org/10.2139/ssrn.2908158

Alan Jeffrey Auerbach

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
510-643-0711 (Phone)
510-643-0413 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

Michael P. Devereux (Contact Author)

Centre for Business Taxation, Oxford University ( email )

Said Business School
Park End Street
Oxford, OX1 1HP
United Kingdom
+44 1865 288507 (Phone)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Michael Keen

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Institute for Fiscal Studies (IFS)

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

John Vella

University of Oxford - Faculty of Law ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

HOME PAGE: http://www.law.ox.ac.uk/profile/john.vella

Oxford University Centre for Business Taxation ( email )

Saïd Business School
Park End Street
Oxford, OX1 1HP
United Kingdom

HOME PAGE: http://www.sbs.ox.ac.uk/community/people/john-vella

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