Destination principle

The destination principle is a concept of international taxation which allows for value added taxes to be retained by the country where the taxed product is being sold.[1] They are collected on imports and rebated on exports.[1]

This principle also is applied to the Goods and Services Tax of several countries like India.

Origin versus destination principle

According to Alan V. Deardorff at the University of Michigan, Ann Arbor, the origin principle, in contrast to the destination principle in international taxation is the principle "that value added taxes be kept only by the country where production takes place. Under the origin principle, value added taxes are not collected on imports and not rebated on exports.[2] In contrast, the destination principle, which allows for value added taxes to be retained by the country where the taxed product is being sold.[1]

References

  1. 1 2 3 Alan V. Deardorff (2000), Destination Principle, Deardorffs' Glossary of International Economics, retrieved February 18, 2017, Border tax adjustment: Rebate of indirect taxes on exported goods, and levying of them on imported goods. May distort trade when tax rates differ or when adjustment does not match the tax paid.
  2. ↑ Alan V. Deardorff (2000), Destination Principle, Deardorffs' Glossary of International Economics, retrieved February 18, 2017


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