DP16925 The Global Minimum Tax

Author(s): Niels Johannesen
Publication Date: January 2022
Keyword(s): global minimum tax, International Taxation, multinational firms, Profit shifting, Tax avoidance
JEL(s):
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16925

This paper studies how the global minimum tax shapes national tax policies and welfare in a formal model of international tax competition with heterogeneous countries. The net welfare effect is generally ambiguous from the perspective of non-havens. On the one hand, the global minimum tax raises their welfare by curbing profit shifting, which boosts government revenue. One the other hand, it lowers their welfare by increasing equilibrium tax rates in havens, which transfers real resources from non-haven firms to haven governments. The net welfare effect is unambiguously positive when the global minimum rate is so high that profit shifting ends.