TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Friday, December 23, 2016

Weekly SSRN Tax Article Review And Roundup

This week, David Gamage (UC-Berkeley, moving to Indiana) reviews a new article by Reuven Avi-Yonah (UC-Irvine) and Kimberly A. Clausing (Reed), Problems with Destination-Based Corporate Taxes and the Ryan Blueprint.

Gamage (2017)The House Republicans’ plans to reform the U.S. corporate tax have been the talk of tax policy town, as of late.  Based to at least some extent on the work of my soon-to-be-former colleague Alan Auerbach, the reforms being discussed would transform the corporate tax into a destination-based cash-flow form of taxation.   

Avi-Yonah and Clausing’s draft article critiques these plans.  As they conclude (p. 16):

“The Ryan Blueprint destination based cash-flow tax is not ready for prime-time. No other country had adopted a similar tax, and as the above analysis makes clear, there are myriad issues that would need to be worked through before any such tax were adopted. These issues are not small: the plan is incompatible with trade rules in a manner which harms our trading partners, it is incompatible with our treaty obligations, it is unlikely to put an end to income shifting, it generates political problems due to large numbers of companies that would experience adverse tax treatment changes, and it is likely to generate large revenue losses. In addition, there are important issues surrounding how exporters with losses would be handled (which could lead to inefficient mergers, etc.), how financial firms would be handled, and how U.S. state corporate tax systems would be affected.”  

Myself, I am still in the process of evaluating what I think of the Ryan Blueprint and the destination-based cash-flow model that underlies it.  For anyone else who is similarly pondering these issues over the holiday season, Avi-Yonah and Clausing’s draft article is essential reading.

Here’s the rest of this week’s SSRN Tax Roundup:

http://taxprof.typepad.com/taxprof_blog/2016/12/weekly--1.html

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