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Symmetric cash flow-taxation and cross-border investments

  • Kramer, Frank
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    The discussion about income versus consumption as the ideal tax base looks back on a long history. In recent years, the debate about income versus consumption as the better tax base reemerged in the United States (2002) and in Germany (2006). In view of the long history of the debate, it is surprising that still relatively little research has been done on crossborder-investments in a cash flow-tax system. The presented article tries to fill this gap. For the case of a harmonized introduction of symmetric cash flow-tax systems in several countries, rules are developed that could guarantee a systematic and feasible treatment of crossborder investments. Preference is given to the RF-base-cash flow-tax on the personal level without a separate company tax. As a result the presented article states, that a coordinated introduction of symmetric cash flow-tax systems in several neighboring countries could be possible. To guarantee the success of the reform, each country must be willing to commit to intensive cooperation in tax matters. A unilateral introduction of a cash flow-tax and the resulting clash of a consumption-based tax system with an income-based tax system - the socalled collision-case - will be addressed in a following paper.

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    File URL: http://econstor.eu/bitstream/10419/54955/1/683479199.pdf
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    Paper provided by University of Bayreuth, Chair of Finance and Banking in its series Bayreuth Working Papers on Finance, Accounting and Taxation (FAcT-Papers) with number 2009-03.

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    Date of creation: 2009
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    Handle: RePEc:zbw:bayfat:200903
    Contact details of provider: Postal: Universit├Ątsstra├če 30, 95440 Bayreuth
    Web page: http://www.fiba.uni-bayreuth.de/de/index.html

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    1. Zodrow, George R., 1995. "Taxation, uncertainty and the choice of a consumption tax base," Journal of Public Economics, Elsevier, vol. 58(2), pages 257-265, October.
    2. Zodrow, George R. & McLure, Charles E. Jr., 1988. "Implementing direct consumption taxes in developing countries," Policy Research Working Paper Series 131, The World Bank.
    3. Michael Keen & John King, 2002. "The Croatian profit tax: an ACE in practice," Fiscal Studies, Institute for Fiscal Studies, vol. 23(3), pages 401-418, September.
    4. McLure, Charles E. Jr., 1992. "Substituting Consumption-Based Direct Taxation for Income Taxes as the International Norm," National Tax Journal, National Tax Association, vol. 45(2), pages 145-54, June.
    5. Syed M. Ahsan & Panagiotis Tsigaris, 2003. "Choice of Tax Base Revisited: Cash Flow vs. Prepayment Approaches to Consumption Taxation," CESifo Working Paper Series 983, CESifo Group Munich.
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