The impact of the global minimum tax on corporate tax revenues: evidence for EU Member States

Most Member States have already transposed the EU Minimum Corporate Tax Directive that implements the so-called "Pillar Two" of the global agreement to address the tax challenges arising from the digitalisation of the economy. The Directive ensures a 15% global minimum level of taxation of for multinational enterprise groups and large-scale domestic groups in the Union that have an effective tax rate below 15%. The new top-up tax is expected to reduce profit shifting. While previous estimates have been produced by the IMF, OECD and EU Tax observatory, we bring complementary evidence by considering also the long-term and economy-wide impact of Pillar Two for the EU. Our empirical estimates, based on the 2017-2021 country-by-country reporting (CbCR) data collected by the OECD, suggest that Corporate Income Tax (CIT) revenues in the EU would increase on average by 7.1% or EUR 26 billion annually from the implementation of the Global Minimum Tax Rules by all EU countries in the short run. These calculations take into account the recent policy developments in the US concerning the opt-out from the Pillar Two agreement. Our long-term fiscal projections, once the impact of Pillar Two implementation on business investment is factored in, indicate that CIT revenues would increase annually by 7.0% (EUR 25.7 billion) for the EU as a whole.