A Global Minimum Tax for Large Firms Only: Implications for Tax Competition

Andreas Hauer () and Hayato Kato
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Andreas Hauer: Seminar for Economic Policy, LMU

No 24-06, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: The Global Minimum Tax (GMT) is applied only to firms above a certain size threshold. We set up a simple model of tax competition and profit shifting by heterogeneous multinational firms to evaluate the e ects of this partial coverage of the GMT. A non-haven and a haven country are bound by the GMT rate for large multinationals, but can set tax rates for firms below the threshold non-cooperatively. We show that the introduction of the GMT with a moderate tax rate increases tax revenues in both the non-haven and the haven countries. Gradual increases in the GMT rate, however, trigger a sudden change in the tax competition equilibrium from a uniform to a split corporate tax rate, at which tax revenues in the non-haven country decline. In contrast, gradual increases in the coverage of the GMT never harm the non-haven country. We also discuss the quantitative e ects of introducing a 15% GMT rate in a calibrated version of our model.

Keywords: multinational firms; tax avoidance; profit shifting; tax competitionInput-output (search for similar items in EconPapers)
JEL-codes: F23 H25 H87 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2024-04
New Economics Papers: this item is included in nep-acc, nep-gth, nep-int, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: A Global Minimum Tax for Large Firms Only: Implications for Tax Competition (2024)
Working Paper: A Global Minimum Tax for Large Firms Only: Implications for Tax Competition (2024)
Working Paper: A Global Minimum Tax for Large Firms Only: Implications for Tax Competition (2024)
Working Paper: A Global Minimum Tax for Large Firms Only: Implications for Tax Competition (2024)
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