Impact of the global minimum tax on domestic tax legislation

Reinald Koch, Leon Ostermann and Christoph Spengel

No 26-028, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: This paper examines how jurisdictions have responded to the introduction of the OECD Pillar Two framework and analyses the implications of these developments for international tax competition. Using a comprehensive dataset covering 223 tax systems, we examine the global implementation of Pillar Two mechanisms, the development of statutory corporate income tax (CIT) rates between 2015 and 2025, the redesign of tax incentives, and the extent to which Pillar Two establishes a level playing field for multinational enterprises. The findings reveal substantial asymmetries in the implementation and practical operation of Pillar Two. By 2026, only a limited group of jurisdictions had implemented all major Pillar Two mechanisms, although implementation is considerably more widespread among European countries. At the same time, the long-run decline in statutory CIT rates appears to have slowed following the 2021 Pillar Two agreement. However, low-tax jurisdictions continue to compete through alternative channels, including substance-based tax incentives and preferential regimes designed to interact favourably with Pillar Two rules. Overall, the evidence suggests that Pillar Two is unlikely to eliminate international tax competition but instead may fundamentally reshape its structure. At the same time, heterogeneous implementation across jurisdictions creates the risk that the regime amplifies existing international differences in effective corporate taxation rather than establishing a genuinely level global playing field.

Keywords: Global Minimum Tax; tax competition; firm competition; corporate tax law (search for similar items in EconPapers)
JEL-codes: F23 H25 K34 (search for similar items in EconPapers)
Date: 2026
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