Minimum tax, Tax haven and Activity shifting

Jean Hindriks and Yukihiro Nishimura ()
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Jean Hindriks: CORE (LIDAM) and Economics School of Louvain, Université catholique de Louvain, Louvain-la-Neuve,Belgium
Yukihiro Nishimura: Osaka University

No 25-13, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: New technologies and the globalization of the economy have facilitated tax avoidance through the shifting of profits by multinational enterprises (MNEs) to low-tax jurisdictions. We develop a three-country asymmetric tax competition model where, in addition to the conventional profit shifting to the tax haven, the high- and low-tax member (of an economic union) countries encourage MNEs to shift resources through the shifting of production activities and employment (activity shifting). We examine how the relative proportions of profit vs activity shifting are determined in the noncooperative equilibrium. We also examine the implications of the Global Minimum Tax (GMT).

Keywords: Profit shifting; Tax competition; Tax enforcement (search for similar items in EconPapers)
JEL-codes: C72 F23 F68 H25 H87 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2025-09
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