Affiliation:
1. Department of Economics, University of California, 530 Evans Hall, Berkeley, CA 94720 (email: )
2. Saïd Business School, University of Oxford, Park End Street, Oxford, OX1 1HP, UK (email: )
Abstract
We model the effects of cash-flow taxes, differing according to the location of the tax, on the behavior of a multinational producing and selling in two countries with three sources of economic rent: a fixed basic-production factor (located with initial production), mobile managerial skill, and a fixed final production factor (located with consumption). In general, governments face trade-offs in choosing between alternative taxes. A source-based cash-flow tax creates welfare-impairing production and consumption distortions, but falls partially on firm owners who may be nonresident. By contrast, a destination-based cash-flow tax does not distort behavior, but falls only on domestic residents. (JEL F23, H25, H87)
Publisher
American Economic Association
Subject
General Economics, Econometrics and Finance
Cited by
24 articles.
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