Revenue Implications of Destination-Based Cash-Flow Taxation

33 Pages Posted: 21 Feb 2019

See all articles by Shafik Hebous

Shafik Hebous

International Monetary Fund

Alexander Klemm

International Monetary Fund (IMF)

Saila Stausholm

Copenhagen Business School

Multiple version iconThere are 2 versions of this paper

Date Written: 2019

Abstract

We estimate the revenue implications of a Destination Based Cash Flow Tax (DBCFT) for 80 countries. On a global average, DBCFT revenues under unchanged tax rates would remain similar to the existing corporate income tax (CIT) revenue, but with sizable redistribution of revenue across countries. Countries are more likely to gain revenue if they have trade deficits, are not reliant on the resource sector, and/or—perhaps surprisingly—are developing economies. DBCFT revenues tend to be more volatile than CIT revenues. Moreover, we consider the revenue losses resulting from spillovers in case of unilateral implementation of a DBCFT. Results suggest that these spillover effects are sizeable if the adopting country is large and globally integrated. These spillovers generate strong revenue-based incentives for many—but not all—other countries to follow the DBCFT adoption.

Keywords: tax revenue, destination-based cash flow tax, border adjustment tax

JEL Classification: H250, H870

Suggested Citation

Hebous, Shafik and Klemm, Alexander and Stausholm, Saila, Revenue Implications of Destination-Based Cash-Flow Taxation (2019). CESifo Working Paper No. 7457, Available at SSRN: https://ssrn.com/abstract=3338811

Shafik Hebous (Contact Author)

International Monetary Fund ( email )

Washington, DC
United States

Alexander Klemm

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Saila Stausholm

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

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