Destination Based Corporate Tax: An Alternative Approach

Abstract

With the election of Donald Trump and the Republican Party’s domination of Congress, it is time to seriously consider House Speaker Paul Ryan’s blueprint for fundamental tax reform. The Ryan blueprint combines reduced individual rates with a destination-based consumption or cash flow type business tax applicable to large businesses. This blueprint has three major problems: It is incompatible with our WTO obligations, it is incompatible with our tax treaties, and will not solve the problems of income shifting and inversions it is designed to address. This paper proposes an alternative destination-based corporate tax (DBCT) that addresses these problems while retaining the advantages of “border adjustability.”