The economic distortions of a border-adjusted corporate cash flow tax

M Kevin McGee

MPRA Paper from University Library of Munich, Germany

Abstract: This paper explores the efficiency distortions under two types of destination-based corporate cash-flow taxes. Auerbach and Devereux (2015) have shown that a sales-apportioned cash-flow tax will distort consumer prices; this paper shows that those distortions are generally quite small, and are limited solely to industries in which economic profits are earned, and consump- tion is already significantly distorted. This paper also shows that a border-adjusted cash-flow tax will distort consumption decisions that cross borders, such as travel, higher education, and retirement location. In addition, it would affect labor migration decisions, especially for mi- grants who plan either to migrate only temporarily, or to remit a substantial fraction of their earning back to their home country.

Keywords: International Corporate Taxation; Cash Flow Tax; Destination-Based Cash Flow Tax; Formula Apportionment (search for similar items in EconPapers)
JEL-codes: H21 H25 H31 H32 (search for similar items in EconPapers)
Date: 2017-04-05
New Economics Papers: this item is included in nep-acc and nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:79275

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