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Abstract

This paper reviews economic principles for optimality of the taxation of international profit, from both a global and national perspective. It argues that for traditional systems based on the residence of the investor or the source of the income, nothing less than full harmonisation across countries can achieve global optimality. The conditions for national optimality are more difficult to identify, but are most likely to imply source-based taxation. However, source-based taxation requires an allocation of the profits of multinational companies to individual jurisdictions; this is not only very difficult in practice, but in some cases is without any conceptual foundation. The taxation of interest income on a residence basis is also hard to justify if the aim of the tax system is to tax only the income arising from economic activity in a given country.

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Paper provided by Oxford University Centre for Business Taxation in its series Working Papers with number 0824.

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Date of creation: 2008
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Handle: RePEc:btx:wpaper:0824

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This paper has been announced in the following NEP Reports:

• NEP-ALL-2008-10-13 (All new papers)
• NEP-PBE-2008-10-13 (Public Economics)

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Citations

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Cited by:

1. Johannes Becker & Clemens Fuest, 2011. "The taxation of foreign profits — The old view, the new view and a pragmatic view," Intereconomics: Review of European Economic Policy, Springer, vol. 46(2), pages 92-97, March.
   
   • Johannes Becker & Clemens Fuest, 2011. "The taxation of foreign profits - the old view, the new view and a pragmatic view," Working Papers 1104, Oxford University Centre for Business Taxation.
2. Peter Egger & Valeria Merlo & Martin Ruf & Georg Wamser, 2012. "Consequences of the New UK Tax Exemption System: Evidence from Micro-level Data," CESifo Working Paper Series 3942, CESifo Group Munich.
3. Johannes Becker, 2010. "Strategic Trade Policy through the Tax System," CESifo Working Paper Series 3066, CESifo Group Munich.
4. Johannes Becker, 2009. "Taxation of Foreign Profits with Heterogeneous Multinational Firms," CESifo Working Paper Series 2899, CESifo Group Munich.
5. Elschner, Christina & Heckemeyer, Jost Henrich & Spengel, Christoph, 2009. "Besteuerungsprinzipien und effektive Unternehmenssteuerbelastungen in der Europäischen Union," ZEW Discussion Papers 09-034, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
6. Christina Elschner & Jost H. Heckemeyer & Christoph Spengel, 2011. "Besteuerungsprinzipien und effektive Unternehmenssteuerbelastungen in der Europäischen Union: Regelt sich die EU‐weite Steuerharmonisierung von selbst?," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 12(1), pages 47-71, 02.

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