{
  "title": "A Destination-Based Allowance for Corporate Equity",
  "publication": "IMF Working Papers, November 8, 2018",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2018/11/08/a-destination-based-allowance-for-corporate-equity-46314",
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  "summary": "Following renewed academic and policy interest in the destination-based principle for taxing profits—particularly through a destination-based cash flow tax (DBCFT)—this paper studies other forms of efficient destination-based taxes.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Authors: Shafik Hebous, Alexander D Klemm\n- Date: November 8, 2018\n- Purpose: Studies destination-based forms of efficient corporate taxes, focusing on the Destination-Based Allowance for Corporate Equity (DBACE) and Allowance for Corporate Capital (DBACC).\n- Context: Follows renewed academic and policy interest in destination-based profit taxation, particularly the destination-based cash flow tax (DBCFT)."
    },
    {
      "heading": "Key findings",
      "content": "- The paper analyzes DBACE and DBACC as destination-based tax designs and describes the adjustments required to convert origin-based taxes into destination-based versions.\n- Both the DBACC and DBACE reduce profit shifting and tax competition, but neither can fully eliminate them.\n- The DBACE is more sensitive to profit shifting and tax competition than the DBACC.\n- Given the potential major political cost of switching from an origin to a destination-based tax system, the paper concludes that the advantages of the DBCFT are likely to outweigh the transitional advantages of the DBACE/DBACC."
    },
    {
      "heading": "Adjustments required (as described)",
      "content": "- Transforming origin-based taxes into destination-based DBACE/DBACC requires:\n  - Border adjustments (as under a DBCFT).\n  - Additional adjustments to capital and equity beyond those border adjustments."
    },
    {
      "heading": "Policy implications and comparative assessment",
      "content": "- DBACE and DBACC offer improvements in reducing profit shifting and tax competition relative to origin-based designs, but:\n  - They cannot fully eliminate profit shifting or tax competition.\n  - DBACE is more sensitive than DBACC, implying different vulnerability profiles.\n- Transition considerations:\n  - Potential major political costs associated with switching to a destination-based tax system.\n  - Overall assessment favors the DBCFT when weighing its advantages against the transitional advantages of DBACE/DBACC."
    },
    {
      "heading": "Subject areas and keywords",
      "content": "- Subject: Allowance for corporate equity, Corporate income tax, Discount rates, Financial institutions, Financial services, Revenue administration, Stocks, Taxes, Value-added tax\n- Keywords: ACC, ACE, Allowance for corporate equity, B. profit shifting, based allowance, border tax, capital stock, competition policy tool, copyright Page, Corporate income tax, depreciation rate, Destination-based allowance, Destination-Based Taxation, Discount rates, E. exchange rate, Global, interest rate, interest receipt, investment goods, notional interest rate, rate of return, Stocks, tax competition, tax saving, upfront tax cost, Value-added tax, WP\n\n---\n\n Content in this bundle\n\n- A Destination-Based Allowance for Corporate Equity, WP/18/239, November 2018\n  - A Destination-Based Allowance for Corporate Equity, WP/18/239, November 2018 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - A Destination-Based Allowance for Corporate Equity, WP/18/239, November 2018 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2018/11/08/a-destination-based-allowance-for-corporate-equity-46314"
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    "Authors: Shafik Hebous, Alexander D Klemm",
    "Published: November 8, 2018",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781484381908.001",
    "Authors: Shafik Hebous, Alexander D Klemm",
    "Date: November 8, 2018",
    "Purpose: Studies destination-based forms of efficient corporate taxes, focusing on the Destination-Based Allowance for Corporate Equity (DBACE) and Allowance for Corporate Capital (DBACC).",
    "Context: Follows renewed academic and policy interest in destination-based profit taxation, particularly the destination-based cash flow tax (DBCFT).",
    "The paper analyzes DBACE and DBACC as destination-based tax designs and describes the adjustments required to convert origin-based taxes into destination-based versions.",
    "Both the DBACC and DBACE reduce profit shifting and tax competition, but neither can fully eliminate them.",
    "The DBACE is more sensitive to profit shifting and tax competition than the DBACC.",
    "Given the potential major political cost of switching from an origin to a destination-based tax system, the paper concludes that the advantages of the DBCFT are likely to outweigh the transitional advantages of the DBACE/DBACC.",
    "Transforming origin-based taxes into destination-based DBACE/DBACC requires:",
    "DBACE and DBACC offer improvements in reducing profit shifting and tax competition relative to origin-based designs, but:",
    "Transition considerations:",
    "Subject: Allowance for corporate equity, Corporate income tax, Discount rates, Financial institutions, Financial services, Revenue administration, Stocks, Taxes, Value-added tax",
    "Keywords: ACC, ACE, Allowance for corporate equity, B. profit shifting, based allowance, border tax, capital stock, competition policy tool, copyright Page, Corporate income tax, depreciation rate, Destination-based allowance, Destination-Based Taxation, Discount rates, E. exchange rate, Global, interest rate, interest receipt, investment goods, notional interest rate, rate of return, Stocks, tax competition, tax saving, upfront tax cost, Value-added tax, WP",
    "**A Destination-Based Allowance for Corporate Equity, WP/18/239, November 2018**"
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