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Fundamental Tax ReformIssues, Choices, and Implications$
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John W. Diamond and George R. Zodrow

Print publication date: 2008

Print ISBN-13: 9780262042475

Published to MIT Press Scholarship Online: August 2013

DOI: 10.7551/mitpress/9780262042475.001.0001

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PRINTED FROM MIT PRESS SCHOLARSHIP ONLINE (www.mitpress.universitypressscholarship.com). (c) Copyright The MIT Press, 2022. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in MITSO for personal use.date: 07 July 2022

Corporate Taxes in the World Economy: Reforming the Taxation of Cross-border Income

Corporate Taxes in the World Economy: Reforming the Taxation of Cross-border Income

(p.318) (p.319) 7 Corporate Taxes in the World Economy: Reforming the Taxation of Cross-border Income
Fundamental Tax Reform

Harry Grubert

Rosanne Altshuler

The MIT Press

This chapter examines the corporate income tax in a world economy, focusing on potential reforms of the tax treatment of cross-border income flows. Specifically, it considers proposals for tax exemption of repatriated dividends (a territorial tax system) and a tax burden-neutral switch to a residence-based global system whereby foreign source income is taxed currently in the United States while corporate tax rates are reduced. It also considers destination-based and origin-based consumption taxes and suggests that the burden-neutral tax system seems to provide greater efficiency gains, particularly due to reduced incentives for income shifting across countries. Moreover, the chapter discusses the effect of increasing international capital mobility on the taxation of capital income, the tax actually borne by different types of cross-border income such as dividends and royalties, and tax reform in an open economy.

Keywords:   corporate income tax, income flows, tax exemption, consumption taxes, capital mobility, capital income, dividends, royalties, tax reform, open economy

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