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VAT and the taxation of rents
Author(s) -
Boadway Robin,
Sato Motohiro,
Tremblay JeanFrançois
Publication year - 2021
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12510
Subject(s) - economic rent , economics , monetary economics , cash flow , corporate tax , value added tax , indirect tax , tax reform , tax avoidance , public economics , international economics , microeconomics , finance
Cash‐flow corporate taxes can tax corporate‐source rents and avoid some of the distortions on investment and financing caused by conventional corporate taxes. However, cash‐flow taxes applied on an origin basis are prone to international profit‐shifting, which can lead to a competitive reduction in tax rates. While this can be avoided by a destination‐based cash‐flow tax, most countries have opted for origin‐based taxation, asserting the right to tax rents generated within their jurisdictions. Since a value‐added tax (VAT) implicitly includes rents in its base, it can complement origin‐based corporate taxation. We compare and contrast the use of destination and origin VATs as complements to an origin‐based cash‐flow corporate tax.