A European Perspective on the US Plans for a Destination Based Cash Flow Tax

23 Pages Posted: 28 Feb 2017 Last revised: 10 Mar 2017

See all articles by Johannes Becker

Johannes Becker

University of Münster

Joachim Englisch

University of Münster - Faculty of Law

Date Written: February 10, 2017


The Republican majority in the US House of Representatives is considering the introduction of a destination based cash flow tax (DBCFT). A unilateral introduction of such a tax system raises a range of questions due to the co-existence with source based taxation systems abroad; moreover, it might be incompatible with world trade law. Adopting a European perspective, we show that foreign exporters may suffer, but foreign firms with affiliation in the US may benefit from a switch to the DBCFT. American multinational firms with affiliates abroad will be the likely losers of this policy – a surprising finding given President Trump’s “America first!” rhetoric. Finally, tax competition over profits, IP location and investment will further intensify, which will require policy reactions by the EU and its member countries far beyond the implementation of the OECD BEPS project. We will therefore also discuss the WTO dimension of the reform plans and the legal and economic implications of possible adjustments in EU tax systems.

Keywords: DBCFT, business tax reform, Ryan blueprint, destination based taxation, WTO and taxes

JEL Classification: E62, F13, H25

Suggested Citation

Becker, Johannes and Englisch, Joachim, A European Perspective on the US Plans for a Destination Based Cash Flow Tax (February 10, 2017). Available at SSRN: https://ssrn.com/abstract=2924313 or http://dx.doi.org/10.2139/ssrn.2924313

Johannes Becker

University of Münster

Schlossplatz 2
Muenster, D-48149

Joachim Englisch (Contact Author)

University of Münster - Faculty of Law ( email )

Universitaetsstr. 14-16
Muenster, 48149

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