A Global Minimum Tax for Large Firms Only: Implications for Tax Competition

Andreas Haufler, Hayato Kato and Hayato Kato
Authors registered in the RePEc Author Service: Hayato Kato

No 11087, CESifo Working Paper Series from CESifo

Abstract: The Global Minimum Tax (GMT) is applied only to firms above a certain size threshold, permitting countries to set differential tax rates for small and large firms. We analyse tax competition between a tax haven and a non-haven country for heterogeneous multinationals to evaluate the effects of this partial coverage of GMT. We show that the introduction of a moderate GMT increases tax revenues in both the haven and the non-haven countries. Gradual increases in the GMT rate, however, induce the haven to set a discriminatory, lower tax rate on small multinationals, causing revenues in the non-haven country to decline at the switch of regimes. We also discuss the quantitative effects of introducing GMT in a calibrated version of our model.

Keywords: multinational firms; tax avoidance; Global Minimum Tax; profit shifting; tax competition (search for similar items in EconPapers)
JEL-codes: F23 H25 H87 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-pub
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Working Paper: A Global Minimum Tax for Large Firms Only: Implications for Tax Competition (2024)
Working Paper: A Global Minimum Tax for Large Firms Only: Implications for Tax Competition (2024)
Working Paper: A Global Minimum Tax for Large Firms Only: Implications for Tax Competition (2024)
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