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A Practical Proposal to End Corporate Tax Abuse: METR, a Minimum Effective Tax Rate for Multinationals

Author

Listed:
  • Alex Cobham

    (Tax Justice Network)

  • Tommaso Faccio

    (Independent Commission for the Reform of International Corporate Taxation, Nottingham University Business School)

  • Javier Garcia-Bernardo

    (Tax Justice Network, CORPTAX, Charles University in Prague)

  • Petr Jansky

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)

  • Jeffery Kadet

    (Lancaster University UK, International Centre for Tax and Development)

  • Sol Picciotto

    (University of Washington School of Law in Seattle)

Abstract

An initiative is needed to break the logjam in the international negotiations to reform taxation of multinational enterprises (MNEs). The explosion of profit shifting observed since the 1990s has resulted in hundreds of billions of dollars of tax revenues being lost around the world each year - but reform efforts have thus far failed to deliver measurable progress on the primary agreed goal of better aligning MNEs´ taxable profits with the location of their real economic activity. More recently, countries have committed also to ensure that MNEs´ global profits are subject to a minimum effective tax rate, but progress towards international agreement remains stalled. Our proposal for a minimum effective tax rate (METR) could be applied to MNEs by any countries that choose to do so, whether they are home to MNEs, host of MNEs, or both. The METR would be compatible with existing tax treaties, but being non-discriminatory it also complies with other international obligations and could be introduced unilaterally. Economic modelling shows the METR would deliver major revenue gains for participating countries, and adoption would also contribute to, rather than impede, momentum for a more comprehensive multilateral agreement.

Suggested Citation

  • Alex Cobham & Tommaso Faccio & Javier Garcia-Bernardo & Petr Jansky & Jeffery Kadet & Sol Picciotto, 2021. "A Practical Proposal to End Corporate Tax Abuse: METR, a Minimum Effective Tax Rate for Multinationals," Working Papers IES 2021/08, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jul 2021.
    • Handle: RePEc:fau:wpaper:wp2021_08
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    File URL: https://ies.fsv.cuni.cz/en/veda-vyzkum/working-papers/6412
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    Cited by:

    1. Saila Stausholm & Petr Janský & Marek Šedivý, 2022. "Illicit financial flows and country-by-country reporting in extractive industries," WIDER Working Paper Series wp-2022-76, World Institute for Development Economic Research (UNU-WIDER).
    2. Alex Cobham & Tommaso Faccio & Javier Garcia‐Bernardo & Petr Janský & Jeffery Kadet & Sol Picciotto, 2022. "A Practical Proposal to end Corporate Tax Abuse: METR, a Minimum Effective Tax Rate for Multinationals," Global Policy, London School of Economics and Political Science, vol. 13(1), pages 18-33, February.
    3. Tomáš Boukal & Petr Janský & Miroslav Palanský, 2025. "Global Minimum Tax and Profit Shifting," Working Papers 025, EU Tax Observatory.

    More about this item

    Keywords

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    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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