The global minimum tax raises more revenues than you think, or much less

The OECD’s global minimum tax (GMT) of 15% on what is deemed excess profit of multinationals aims to reduce profit shifting to low-tax jurisdictions. . We study the revenue effects of the GMT by focusing on strategic tax setting effects. The direct effect from less profit shifting increases revenues in high-tax countries. A secondary effect, however, is that the value of attracting foreign investments increases, which intensifies tax competition. We show that when governments compete via lump sum subsidies, the revenue gains from less profit shifting are exactly offset by higher subsidies. When competition is by tax rates, revenues may increase, however.