Minimum Global Tax: Winners and Losers in the Race for Mergers and Acquisitions

Vito Amendolagine, Randolph Bruno (), Maria Cipollina and Gianluigi De Pascale
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Vito Amendolagine: University of Foggia
Gianluigi De Pascale: University of Foggia

No 16144, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This study aims to quantify the impact of the global minimum corporate tax rate – a pillar of the OECD's reform of international taxation – on cross-border mergers and acquisitions (M&A) involving large multinational enterprises (MNEs). First, the influence of differences in capital taxation on bilateral cross-border M&A is assessed using a structural gravity model. The resulting estimated coefficients are then applied to evaluate the impact of a 15% global minimum tax rate on cross-border investments by firms whose revenue exceeds €750 million, whenever the target country's corporate tax rate is lower. The study exploits a large, disaggregated dataset of 13,562 investor-firm M&A data points from 2001 to 2020 relating to 516 industries, defined at the 4-digit level of the NACE Rev. 2 classification, in 109 'source' countries, and 559 industries (defined at the same of detail) in 161 'target' countries. The empirical results suggest that M&A flows are higher when the source and target countries have similar tax rates, while the overall effect of the global minimum corporate tax on M&A flows would be negative (as expected), but small.

Keywords: global tax rate; bilateral foreign direct investment; profit shifting; Structural Gravity model (search for similar items in EconPapers)
JEL-codes: F23 H2 H87 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2023-05
New Economics Papers: this item is included in nep-int, nep-pbe and nep-pub
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