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The Economics of the Global Minimum Tax

Author

Listed:
  • Guttorm Schjelderup
  • Frank Stähler
Abstract
This paper shows that the OECD inclusive framework of Pillar Two fails to implement the claimed 15% minimum corporate tax for subsidiaries of multinational corporations. The reason is that the Substance-based Income Exclusion of Pillar Two allows to tax-deduct payroll costs and user costs of intangible assets twice from the tax base of the top-up tax. Employing a standard multinational firm model, we show that Pillar Two dampens tax motivated transfer pricing, but changes the employment, investment and import incentives. For a sufficiently large cost share of labor and/or capital, the Substance-based Income Exclusion is equivalent to a production subsidy.

Suggested Citation

  • Guttorm Schjelderup & Frank Stähler, 2023. "The Economics of the Global Minimum Tax," CESifo Working Paper Series 10319, CESifo.
    • Handle: RePEc:ces:ceswps:_10319
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    References listed on IDEAS

    as
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    Cited by:

    1. Hikaru Ogawa & Ryota Tsuchiya, 2024. "Taxing Cross-Border Online Sales for Pareto Improvement in Tax Revenue," CIRJE F-Series CIRJE-F-1235, CIRJE, Faculty of Economics, University of Tokyo.
    2. Michael Overesch & Dirk Schindler & Georg Wamser, 2024. "Design and Consequences of CFC and GILTI Rules: A Review and Potential Lessons for the Global Minimum Tax," CESifo Working Paper Series 11018, CESifo.

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    More about this item

    Keywords

    corporate taxation; BEPS; Pillar Two; minimum tax;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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