Does the Global Minimum Tax Restrain Tax Competition?

Yusuke Makino and Hikaru Ogawa
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Yusuke Makino: Graduate School of Economics, The University of Tokyo
Hikaru Ogawa: Faculty of Economics, The University of Tokyo

No CIRJE-F-1259, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: This paper studies the anticipated effects of a Global Minimum Tax (GMT). Although the GMT is widely expected to curb tax competition by raising effective tax rates in low-tax jurisdictions, we show that by weakening direct competition in the short-run, it can induce entry by countries that previously could not participate in the long-run. This entry expands the set of competing jurisdictions and, on this extensive margin of participation, can place additional downward pressure on tax rates. Consequently, the introduction of the GMT need not restrain excessive tax reductions.

Pages: 21 pages
Date: 2025-10
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