Addressing the Transfer-Pricing Problem in an Origin-Basis X Tax
AbstractIn a previous paper I described how the tax design called the X Tax would facilitate an international tax system free of many of the complexities and avoidance opportunities plaguing the existing international tax regime and also have neutrality properties generally deemed desirable. A choice must, however, be made between two basic treatments of transborder business transactions--the origin and destination principles. The destination-principle approach sidesteps the need to identify arm's length terms of transborder transactions between related business entities--the transfer-pricing problem. This serious problem remains in the origin-principle approach, which, however, presents fewer challenges of monitoring the flow of goods and services across borders, obviates what I call the "tourism problem" whereby people can reduce their taxes by consuming in a low-tax jurisdiction and, arguably most important, avoids transition effects associated with introduction of the tax and subsequent tax rate changes that occur in the destination approach. In this paper I explore possible special rules for transborder transactions between related parties in an origin-based system to eliminate the transfer-pricing problem. Copyright 2003 by Kluwer Academic Publishers
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Bibliographic InfoArticle provided by Springer in its journal International Tax and Public Finance.
Volume (Year): 10 (2003)
Issue (Month): 5 (September)
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Web page: http://www.springerlink.com/link.asp?id=102915
Other versions of this item:
- David F. Bradford, 2003. "Addressing the Transfer-Pricing Problem in an Origin-Basis X Tax," NBER Working Papers 9843, National Bureau of Economic Research, Inc.
- David Bradford, 2003. "Addressing the Transfer-Pricing Problem in an Origin-Basis X Tax," CESifo Working Paper Series 997, CESifo Group Munich.
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
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