Minimum tax, Tax haven and Activity shifting

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).