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Minimum tax, Tax haven and Activity shifting

Author

Listed:
  • Jean Hindriks

    (CORE (LIDAM) and Economics School of Louvain, Université catholique de Louvain, Louvain-la-Neuve,Belgium)

  • Yukihiro Nishimura

    (Osaka University)

Abstract

New technologies and the globalization of the economy have facilitated tax avoidance through the shifting of profits by multinational enterprises (MNEs) to low-tax jurisdictions. We develop a three-country asymmetric tax competition model where, in addition to the conventional profit shifting to the tax haven, the high- and low-tax member (of an economic union) countries encourage MNEs to shift resources through the shifting of production activities and employment (activity shifting). We examine how the relative proportions of profit vs activity shifting are determined in the noncooperative equilibrium. We also examine the implications of the Global Minimum Tax (GMT).

Suggested Citation

  • Jean Hindriks & Yukihiro Nishimura, 2025. "Minimum tax, Tax haven and Activity shifting," Discussion Papers in Economics and Business 25-13, Osaka University, Graduate School of Economics.
  • Handle: RePEc:osk:wpaper:2513
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    Keywords

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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F68 - International Economics - - Economic Impacts of Globalization - - - Policy
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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