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

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The OECD’s proposal for a global minimum tax (GMT) of 15% aims for a reversal of a decline of corporate tax rates. 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 firm-specific or uniform subsidies, the revenue gains from less profit shifting are exactly offset by higher subsidies. When competition is by tax rates, revenues may increase however.

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  • Janeba, Eckhard & Schjelderup, Guttorm, 2022. "The global minimum tax raises more revenues than you think, or much less," Discussion Papers 2022/6, Norwegian School of Economics, Department of Business and Management Science, revised 22 Feb 2023.
    • Handle: RePEc:hhs:nhhfms:2022_006
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    Cited by:

    1. David R. Agrawal, 2023. "Limits to Competition: Strategies for Promoting Jurisdictional Cooperation," NBER Chapters, in: Policy Responses to Tax Competition, National Bureau of Economic Research, Inc.
    2. Hebous, Shafik & Keen, Michael, 2023. "Pareto-improving minimum corporate taxation," Journal of Public Economics, Elsevier, vol. 225(C).
    3. David R. Agrawal & James M. Poterba & Owen M. Zidar, 2024. "Policy Responses to Tax Competition: An Introduction," NBER Working Papers 32090, National Bureau of Economic Research, Inc.
    4. Amendolagine, Vito & Bruno, Randolph Luca & Cipollina, Maria & De Pascale, Gianluigi, 2023. "Minimum Global Tax: Winners and Losers in the Race for Mergers and Acquisitions," IZA Discussion Papers 16144, Institute of Labor Economics (IZA).
    5. Guttorm Schjelderup & Frank Stähler, 2023. "The Economics of the Global Minimum Tax," CESifo Working Paper Series 10319, CESifo.
    6. David R. Agrawal & James M. Poterba & Owen M. Zidar, 2024. "Introduction to "Policy Responses to Tax Competition"," NBER Chapters, in: Policy Responses to Tax Competition, National Bureau of Economic Research, Inc.
    7. Becker, Johannes & Wilson, John D., 2023. "Tax competition with two tax instruments — and tax base erosion," Journal of Public Economics, Elsevier, vol. 225(C).

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    More about this item

    Keywords

    Global Minimum Tax; Tax Competition; OECD BEPS; Pillar II;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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