The destination-based cash flow tax and double tax treaties

This paper discusses how a DBCFT, if adopted by one or more states, would fit with existing double tax treaties. Given that the form of double tax treaties is based on the assumption that both contracting states operate a traditional income tax system and given that a DBCFT is economically equivalent to a VAT combined with a reduction in payroll taxes, it is not surprising that treaties are poorly equipped to accommodate a DBCFT.

The treatment of a DBCFT under a double tax treaty depends crucially on whether a DBCFT is within the scope of the taxes.

Richard Collier and Michael Devereux, CBT Working Paper 17/06