Revenue Implications of Destination-Based Cash-Flow Taxation
IMF Working Papers, January 15, 2019
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Bibliographic details
- Authors: Shafik Hebous, Alexander D Klemm, Saila Stausholm
- Published: January 15, 2019
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484392935.001
Summary and core finding
- Study estimates 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.
Redistribution and country characteristics
- Sizable redistribution of revenue across countries is expected under DBCFT adoption.
- Factors associated with revenue gains:
- Trade deficits.
- Lack of reliance on the resource sector.
- Developing economies.
- Implicitly, countries with trade surpluses or resource reliance are more likely to lose revenue (as contrasted with the gain factors listed above).
Volatility and unilateral adoption spillovers
- DBCFT revenues tend to be more volatile than CIT revenues.
- The analysis considers 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.
Policy implications (from findings)
- Revenue-based incentives exist for other countries to adopt DBCFT when spillovers from a large, globally integrated adopter are sizeable.
- Policymakers in trade-deficit countries, non-resource-dependent countries, and many developing economies may find DBCFT adoption revenue-advantageous under unchanged tax rates.
- Awareness of higher revenue volatility under DBCFT should inform fiscal planning and revenue administration.
Publication and metadata
- Authors: Shafik Hebous, Alexander D Klemm, Saila Stausholm
- Publication date: January 15, 2019
- Series: Working Paper No. 2019/007
- Issue: 007
- Pages: 35
- Volume: 2019
- DOI: https://doi.org/10.5089/9781484392935.001
- ISBN: 9781484392935
- ISSN: 1018-5941
- Subjects/Keywords: Corporate income tax, International trade, Revenue administration, Taxes, Trade balance, Trade surpluses, Value-added tax; 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
Revenue Implications of Destination-Based Cash-Flow Taxation — Shafik Hebous, Alexander D Klemm, Saila Stausholm; IMF Working Paper No. 2019/007 (January 15, 2019).
Content in this bundle
- Revenue Implications of Destination-Based Cash-Flow Taxation, WP/19/7, January 2019