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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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|
|Centre:||Faculty of Finance|
|Date Deposited:||23 Jun 2015 18:07|
|Last Modified:||23 Oct 2015 14:08|
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