VAT and the taxation of rents

Robin Boadway, Motohiro Sato and Jean-François Tremblay

Journal of Public Economic Theory, 2021, vol. 23, issue 4, 601-621

Abstract: Cash‐flow corporate taxes can tax corporate‐source rents and avoid some of the distortions on investment and financing caused by conventional corporate taxes. However, cash‐flow taxes applied on an origin basis are prone to international profit‐shifting, which can lead to a competitive reduction in tax rates. While this can be avoided by a destination‐based cash‐flow tax, most countries have opted for origin‐based taxation, asserting the right to tax rents generated within their jurisdictions. Since a value‐added tax (VAT) implicitly includes rents in its base, it can complement origin‐based corporate taxation. We compare and contrast the use of destination and origin VATs as complements to an origin‐based cash‐flow corporate tax.

Date: 2021
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https://doi.org/10.1111/jpet.12510

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Persistent link: https://EconPapers.repec.org/RePEc:bla:jpbect:v:23:y:2021:i:4:p:601-621

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