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

Hayato Kato and Andreas Haufler

No 516, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

Abstract: The Global Minimum Tax (GMT) is applied only to firms above a certain size threshold, permitting countries to set differential tax rates for small and large firms. We analyze tax competition among multiple tax havens and a non-haven country for heterogeneous multinationals to evaluate the effects of this partial coverage of GMT. Upon the introduction of a moderately low GMT rate, the havens commit to the single uniform GMT rate for all multinationals. However, gradual increases in the GMT rate induce the havens, and subsequently the non-haven, to adopt discriminatory, lower tax rates for small multinationals. Our calibration exercise shows that the implementation of a 15% GMT rate results in a regime where only the havens adopt split tax rates. Upon GMT introduction, welfare and tax revenues fall in the tax havens but rise in the non-haven, yielding a positive net gain worldwide.

Keywords: global minimum tax; profit shifting; multinational firms (search for similar items in EconPapers)
JEL-codes: F23 H25 H87 (search for similar items in EconPapers)
Date: 2024-12-06
New Economics Papers: this item is included in nep-acc, nep-gth, nep-int, nep-iue, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://rationality-and-competition.de/wp-content/ ... ussion_paper/516.pdf (application/pdf)

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)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rco:dpaper:516

Access Statistics for this paper

More papers in Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition
Bibliographic data for series maintained by Viviana Lalli ().