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Pareto-Improving Minimum Corporate Taxation

Author

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  • Mr. Shafik Hebous
  • Mr. Michael Keen

Abstract

The recent international agreement on a minimum effective corporate tax rate marks a profound change in global tax arrangements. The appropriate level of that minimum, however, has been, and remains, extremely contentious. This paper explores the strategic responses to a minimum tax, which—the policy objective being to change the rules of tax competition game--—are critical for assessing the design and welfare impact of, and prospects for, this fundamental policy innovation. Analysis and calibration plausibly suggest sizable scope for minima that are Pareto-improving, benefiting low as well as high tax countries, over the uncoordinated equilibrium.

Suggested Citation

  • Mr. Shafik Hebous & Mr. Michael Keen, 2021. "Pareto-Improving Minimum Corporate Taxation," IMF Working Papers 2021/250, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2021/250
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    Cited by:

    1. Eckhard Janeba & Guttorm Schjelderup, 2022. "The Global Minimum Tax Raises More Revenues than You Think, or Much Less," CESifo Working Paper Series 9623, CESifo.
    2. Johannesen, Niels, 2022. "The global minimum tax," Journal of Public Economics, Elsevier, vol. 212(C).
    3. Guttorm Schjelderup & Frank Stähler, 2023. "The Economics of the Global Minimum Tax," CESifo Working Paper Series 10319, CESifo.
    4. Niels Johannesen, 2022. "The Global Minimum Tax," CEBI working paper series 22-01, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    5. Alexandre Chirat & Guillaume Sekli, 2022. "Assessing the credibility and fairness of international corporate tax rate harmonization via cooperative game theory," Working Papers 2022-08, CRESE.

    More about this item

    Keywords

    Tax Competition; Minimum Taxation; Corporate Tax Reform; International Taxation; competition game; policy objective; corporate tax reform; best response; country benefit; residence country; Corporate income tax; Competition; Tax avoidance; Global;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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