Destination based cash flow tax

A border-adjusted tax is a tax that is applied to all domestic consumption and excludes any goods or services that are produced here, but consumed elsewhere. A border adjustment conforms to what is called “ destination-based” principle (thus the “ destination-based” in the “ destination-based cash flow tax” ). We estimate the revenue implications of a Destination Based Cash Flow Tax ( DBCFT ) for 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. See all full list on taxjustice.

The last piece of the destination-based cash-flow tax is the border adjustment. The border adjustment applies a tax on imports by disallowing the deduction for purchases from overseas. It also removes exports from the tax base through an exclusion for export income. Under a cash flow tax, there is a negative tax liability in period of - 20. In period the investment makes a return.

For an investment that just breaks even, the total value of the investment in period must be 110: this represents a rate of return of , equal to the discount rate. This paper presents, analyses, and further develops the idea of a destination-based cash-flow tax ( DBCFT ). Its purpose is expositional: to describe the DBCFT , how it might work, what its effects would be and some of the challenges that its implementation would face. We explain the DBCFT below. The destination-based cash flow tax (DBCFT) is currently under consideration in the House of Representatives.

Such a tax could cause a significant change in the inflation-adjusted value of the U. So, what are the possible repercussions? House Republican Blueprint for tax reform and Donald Trump’s subsequent election to the White House. Business Taxes : TaxVox Is A Modified Destination - Based Income Tax The Solution For Taxing Global Multinational Corporations?

Tax authorities around the world are in an increasingly contentious battle over how to tax the income of multinational corporations. House Speaker Paul Ryan proposed to introduce a destination-based cash flow tax (DBCFT) in order to reform America’s corporate income tax (CIT). The basic premise is as follows: A tax would apply to the domestic sales of U. There is a lot of chatter currently in the news regarding proposed tax reform especially the “ destination based cash flow tax ” which is being touted as a form of a value-added tax. If this were simply an income tax , the World Trade Organization (WTO) would likely view it negatively. Widely‐discussed tax instruments often are packages – willfully combining multiple rules at distinct margins.

WW tax = (a) tax FSI at domestic rate, (b) dollar‐for‐dollar reimbursement of foreign taxes. Territorial tax = (a) tax FSI at , (b) foreign taxes ≈ deductible. There would be no tax on exports, but no deduction for imports. The Blueprint is the likely starting point for drafting tax reform legislation in the House. The business provisions of the Blueprint would radically transform the existing corporate income tax and individual income tax on pass-through business income into a consumption- based tax by providing for “ cash - flow ” taxation and border adjustability.

Alan Auerbach, the intellectual architect of the proposal, says the system would be “ highly progressive ”. This paper discusses how a DBCFT, if adopted by one or more states, would fit with existing double tax treaties. Nadine Koch legt ihrer Untersuchung den Vorschlag zugrunde, die Unternehmensbesteuerung am Konzept einer Destination-Based Cash Flow Tax (DBCFT) mit Spezifikation eines Grenzsteuerausgleichs auszurichten und analysiert die Auswirkungen bei einer unilateralen Implementierung in einem Drittland. Two primary concepts of the DBCFT are its move towards a cash flow tax (rather than an income tax) and its use of border adjustments. One specific option for a fundamental reform is a destination-based cash -flow tax (DBCFT), occasionally referred to— slightly misleadingly —as a border-adjusted corporate income tax or a border-adjustment tax. Proponents and detractors are aligne however, in one respect: the DBCFT would be a radical departure from the current corporate tax system.

The key feature of this DBCFT concept as it applies to business tax is the application of the “border adjusted” tax that would significantly change the way the tax code works for corporate entities. In the case of the credit-invoice VAT, the tax is supposed to be levied based on where a good is consumed (its destination ) rather than where it is produced (its origin). To make the corporate tax destination - based , the Ryan-Brady blueprint exempts from taxation any revenue derived from exports, while not providing for deductions on the cost of imports.

A DBCFT has two distinct attributes: a cash - flow tax base and a destination basis. A destination basis could be applied to a variety of tax bases, and arguments for cash - flow taxation originally arose in a purely domestic setting. But there are advantages to combining the destination basis and the cash - flow tax base.

Chief among its ideas is the introduction of the so-called “ destination based cash flow tax ation” (DBCFT).