Some Thoughts on the Relationship between the Destination-Based Cash Flow Tax and VAT

In recent years, a move for destination-based taxes on business profits has become visible around the world. The most revolutionary and sophisticated model for international tax reform is the ‘Destination-Based Cash Flow Tax’ which is meant to replace the traditional corporate income tax and to shift international taxing rights with regard to business profits from the country of origin to the country of destination. This justifies an attempt to compare the DBCFT with VAT – as VAT is levied on a destination basis as well. This chapter analyses the conceptual differences and similarities between a DBCFT and a VAT from an economic and a legal perspective. It raises the issue of whether VAT and DBCFT are different when it comes to their respective compatibility with WTO law. Finally, the chapter discusses policy options for the US and the EU