Advanced Search
MyIDEAS: Login to save this article or follow this journal

Source Rules, Trade and Income Taxes, and Electronic Commerce: Designing Rules for the Taxation of Cross-Border Income


Author Info

  • Grubert, Harry

    (US Treasury Department)

Registered author(s):


    Several issues in the design of international tax rules are examined. One is whether the income from intangible assets such as royalties should be taxed by the host country in which the intangibles are used or the home country in which they were developed. Another is whether local sales should be a basis for taxing foreign companies even if they have no local physical presence. A third related issue is whether a destination basis income tax is a valid policy option. The introduction develops a general framework to evaluate tax regimes, based on efficiency along various behavioral margins such as the choice of where to exploit an intangible asset. The analysis concludes that the income from intangible assets should be taxed by the home country, not the country where it is used. Also, any attempt to tax foreign companies based on their local sales is simply the equivalent of a tariff. The paper shows that there are some extreme circumstances which would justify a tariff to offset the distortions created by an income tax, but electronic commerce does not seem to qualify for this departure from the benefits of free trade. Finally, a destination basis income tax creates an incentive to invest abroad rather than at home. It is an improper attempt to graft a consumption tax concept onto an income tax.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL:
    Download Restriction: no

    Bibliographic Info

    Article provided by Queensland University of Technology (QUT), School of Economics and Finance in its journal Economic Analysis and Policy (EAP).

    Volume (Year): 33 (2003)
    Issue (Month): 2 (September)
    Pages: 237-249

    as in new window
    Handle: RePEc:eap:articl:v:33:y:2003:i:2:p:237-249

    Contact details of provider:
    Postal: GPO Box 2434, BRISBANE QLD 4001
    Web page:
    More information through EDIRC

    Related research


    Find related papers by JEL classification:


    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Baldwin, Richard & Krugman, Paul, 2000. "Agglomeration, Integration and Tax Harmonization," CEPR Discussion Papers 2630, C.E.P.R. Discussion Papers.
    2. Gordon, Roger H, 1986. "Taxation of Investment and Savings in a World Economy," American Economic Review, American Economic Association, vol. 76(5), pages 1086-1102, December.
    3. Charles McLure Jr., 2000. "Alternatives to the concept of permanent establishment : e-commerce and taxation," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 1(3), pages 10-16, October.
    Full references (including those not matched with items on IDEAS)



    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


    Access and download statistics


    When requesting a correction, please mention this item's handle: RePEc:eap:articl:v:33:y:2003:i:2:p:237-249. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Manuela Torgler).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.