International Tax Planning under the Destination-Based Cash Flow Tax

Alan Auerbach, Michael Devereux, Michael Keen and John Vella

National Tax Journal, 2017, vol. 70, issue 4, 783-802

Abstract: This paper considers the implications of the destination-based cash flow tax (DBCFT) for three common ways of shifting taxable profits between countries: through manipulation of transfer prices, the use of debt, and locating intangible assets in low taxed jurisdictions. It shows that none of these planning devices would be available under a DBCFT, if adopted universally. This is because intra-group payments between two countries do not affect tax liabilities in either country. If adopted unilaterally, however, there would be an incentive to shift profit to the adopting country, at the expense of non-adopting countries.

Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:ntj:journl:v:70:y:2017:i:4:p:783-802

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