Working Paper: CEPR ID: DP3401
Authors: Stephen R. Bond; Michael P. Devereux
Abstract: Academic and policy debates generally consider levying tax on corporate profit on either a residence basis or on a source basis. We explore two alternatives, based on the location of consumption, rather than production ? destination-based, as opposed to source-based or residence-based, taxes. We analyse the properties of these taxes, especially with respect to their impact on location decisions and domestic welfare.
Keywords: corporation tax; investment; location
JEL Codes: F21; F23; H25; H32; H87
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| source-based cash flow tax (H25) | post-tax profit of a monopolist (D42) |
| post-tax profit of a monopolist (D42) | production location decision (from home to foreign) (F23) |
| full destination-based cash flow tax (H29) | production location decision (from home to foreign) (F23) |
| VAT-type destination-based cash flow tax (H25) | production location decision (unaffected) (R32) |
| source-based cash flow tax (H25) | utility for domestic consumers (L97) |
| full destination-based cash flow tax (H29) | utility for domestic consumers (L97) |
| VAT-type destination-based cash flow tax (H25) | utility for domestic consumers (L97) |