The Economics of the Global Minimum Tax

Guttorm Schjelderup and Frank Stähler

No 10319, CESifo Working Paper Series from CESifo

Abstract: This paper shows that the OECD inclusive framework of Pillar Two fails to implement the claimed 15% minimum corporate tax for subsidiaries of multinational corporations. The reason is that the Substance-based Income Exclusion of Pillar Two allows to tax-deduct payroll costs and user costs of intangible assets twice from the tax base of the top-up tax. Employing a standard multinational firm model, we show that Pillar Two dampens tax motivated transfer pricing, but changes the employment, investment and import incentives. For a sufficiently large cost share of labor and/or capital, the Substance-based Income Exclusion is equivalent to a production subsidy.

Keywords: corporate taxation; BEPS; Pillar Two; minimum tax (search for similar items in EconPapers)
JEL-codes: F23 F55 H25 H73 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-acc, nep-int, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The economics of the global minimum tax (2024)
Working Paper: The Economics of the Global Minimum Tax (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10319

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