A destination-based allowance for corporate equity

Shafik Hebous and Alexander Klemm

International Tax and Public Finance, 2020, vol. 27, issue 3, No 11, 753-777

Abstract: Abstract Following renewed academic and policy interest in the destination-based principle for taxing profits—particularly through a destination-based cash-flow tax (DBCFT)—this paper studies other forms of efficient destination-based taxes. Specifically, it analyzes the Destination-Based Allowance for Corporate Equity (DBACE) and Allowance for Corporate Capital (DBACC). It describes adjustments that are required to turn an origin into a destination-based version of these taxes. These include adjustments to capital and equity, which are additional to the border adjustments needed under a DBCFT. The paper finds that the DBACC and DBACE reduce profit shifting and tax competition, but cannot fully eliminate them, with the DBACE more sensitive than the DBACC. Overall, given the potential major political cost of switching from an origin to a destination-based tax system, we conclude that advantages of the DBCFT are likely to outweigh the transitional advantages of the DBACE/DBACC.

Keywords: Destination-based taxation; ACE; ACC (search for similar items in EconPapers)
JEL-codes: H21 H25 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1007/s10797-019-09583-4 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: A Destination-Based Allowance for Corporate Equity (2018)
Working Paper: A Destination-Based Allowance for Corporate Equity (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:itaxpf:v:27:y:2020:i:3:d:10.1007_s10797-019-09583-4

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/10797/PS2

DOI: 10.1007/s10797-019-09583-4

Access Statistics for this article

International Tax and Public Finance is currently edited by Ronald B. Davies and Kimberly Scharf

More articles in International Tax and Public Finance from Springer, International Institute of Public Finance Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().