Revenue Implications of Destination-Based Cash-Flow Taxation

By Shafik Hebous, Alexander D Klemm, Saila Stausholm

January 15, 2019

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Shafik Hebous, Alexander D Klemm, and Saila Stausholm. Revenue Implications of Destination-Based Cash-Flow Taxation, (USA: International Monetary Fund, 2019) accessed September 20, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

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.

Subject: Corporate income tax, International trade, Revenue administration, Taxes, Trade balance, Trade surpluses, Value-added tax

Keywords: Border Adjustment Tax, Corporate income tax, DBCFT adoption, DBCFT base, DBCFT country, DBCFT revenue, Destination-Based Cash Flow Tax, Global, Loss-making firm, Profit shifting, Revenue estimate, Revenue loss, Tax Revenue, Trade balance, Trade deficit, Trade surpluses, Value-added tax, WP

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/007
Stock No:

WPIEA2019007
ISBN:

9781484392935
ISSN:

1018-5941

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