VAT and the taxation of rents

Cash-flow corporate taxes can tax corporate-source rents and avoid some of the distortions on investment and financing caused by conventional corporate taxes. However, cash-flow taxes applied on an origin basis are prone to international profit-shifting, which can lead to a competitive reduction in tax rates. While this can be avoided by a destination-based cash-flow tax, most countries have opted for origin-based taxation, asserting the right to tax rents generated within their jurisdictions. Since a value-added tax (VAT) implicitly includes rents in its base, it can complement origin-based corporate taxation. We compare and contrast the use of destination and origin VATs as complements to an origin-based cash-flow corporate tax.