Cash Flow Taxes in an International Setting

Auerbach, Alan J. and Devereux, Michael (2015) Cash Flow Taxes in an International Setting. Said Business School Working Paper 2015-3.

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Abstract

We model the effects of cash flow taxes on company profit which differ according to the base and location of the tax. Our model incorporates a multinational producing and selling in two countries with three sources of rent, each in a different location: a fixed basic production factor (located with initial production), mobile managerial skill, and a fixed final production factor (located with consumption). In the general case, we show that for national governments, there are trade-offs in choosing between alternative taxes. In particular, a cash-flow tax on a source basis creates welfare-impairing distortions to production and consumption, but is partially incident on the owners of domestic production who may be non-resident. By contrast, a destination-based cash-flow tax does not distort behaviour, but is incident only on domestic residents.

Item Type: Oxford Saïd Research Paper
Keywords: finance
Subject(s): Finance
Centre: Faculty of Finance
Date Deposited: 23 Jun 2015 18:07
Last Modified: 23 Oct 2015 14:08
URI: http://eureka.sbs.ox.ac.uk/id/eprint/5362

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