Revenue Effects of the Global Minimum Tax: Country-by-Country Estimates

Mona Barake, Theresa Neef, Paul-Emmanuel Chouc and Gabriel Zucman
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Mona Barake: EU Tax Observatory
Theresa Neef: EU Tax Observatory
Paul-Emmanuel Chouc: EU Tax Observatory
Gabriel Zucman: EU Tax Observatory

No 2, Notes from EU Tax Observatory

Abstract: In October 2021, 136 countries and jurisdictions agreed on the swift implementation of a major reform of the international corporate tax system. In this note, we present simulations of the revenue effects of the global minimum tax of 15% laid out in this agreement. We base our analysis on the most recent country-by-country report statistics released by the OECD. We fnd that high-income countries stand to gain the most from the 15% global minimum tax because most multinational companies are headquartered in high-income countries. The European Union would increase its corporate income tax revenue by more than €80 billion a year, by levying a minimum tax of 15% without carve-outs, an increase equivalent to a quarter of current corporate tax revenue. The United States would gain about €57 billion a year. Revenue gains would be smaller in developing countries (e.g., €6 billion for China, €4 billion for South Africa, €1.5 billion for Brazil). We also find that substance-based carve-outs—exemptions that were made more generous in the final agreement—decrease revenues from the minimum tax. In the agreement reached in October 2021, profits equal to 10% of assets plus 8% of payroll are exempt from the minimum tax for the first fiscal year. This exemption reduces revenues from €83 billion to € 64 billion or 23% of the initial revenue gain for the EU-27. Over ten years, the carve-out rates progressively decrease to 5% of assets and payroll. These long-run rates will still reduce revenue gains by about €12 billion or 14%. Our analysis is based on the methodology used in the inaugural report of the EU Tax Observatory, “Collecting the Tax deficit of Multinational Companies: Simulations for the European Union†(Baraké et al., June 2021). We update the results of this report using more recent data, which allow us to provide more comprehensive estimates. Specifically, we draw on the July 2021 release of OECD country-by-country report statistics, which cover the year 2017 (while Baraké et al., 2021, used country-by country statistics that covered the year 2016). The new data include additional headquarter countries such as Germany, Spain, Switzerland, and the United Kingdom. In our original report we provided estimations for those countries based on data by Tørsløv, Wier and Zucman (2018). Based on the more comprehensive CbCR data, we find a larger revenue gain from the global minimum tax for the European Union.

Keywords: Global minimum tax; corporate tax revenue; country-by-country reporting (search for similar items in EconPapers)
JEL-codes: F23 H26 H87 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2021-10
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