Jurisdictions with high tax rates account for more than half of the low-taxed profits reported globally by multinational enterprises (MNEs), according to new OECD analysis.
The data on the taxation of large MNE profits show how tax incentives and other concessions in jurisdictions with high average tax rates enable some firms to pay low effective tax rates (ETRs). The findings highlight how the introduction of a global minimum tax rate on the profits of large MNEs agreed by the OECD/G20 Inclusive Framework would create new opportunities for how governments raise and send their tax revenues.
The OECD’s latest Corporate Tax Statistics report and accompanying working paper, ‘Effective Tax Rates of MNEs: New evidence on global low-taxed profit’, provide new data on global low-taxed profit, a key issue for determining the impact of the global minimum tax.
The OECD said: “The paper finds that an estimated 37.1% (.411 billion) of global net profits (totalling .503 billion) are taxed at ETRs below 15%. In contrast to earlier studies, which have focused on low-taxed profit only in low-tax jurisdictions, the new paper estimates that high-tax jurisdictions – jurisdictions with statutory and average tax rates above 15% – account for more than half (56.8%) of all global profits currently taxed below 15%. This profit in high-tax jurisdictions exists across all country groups regardless of income level, with an estimated 28% of all global low-taxed profit being located in low or middle-income jurisdictions.
“High-tax jurisdictions even account for more than 20% of very low-taxed profits – those with an ETR below 5%. These low-taxed profits in jurisdictions with high tax rates, which are likely the result of tax incentives and other targeted concessions, highlight the revenue-raising potential of the global minimum tax, even in jurisdictions that have previously been thought to be high-tax.”
The data in Corporate Tax Statistics covers the taxation of multinationals in more than 160 countries and jurisdictions.
These low-taxed profits in jurisdictions with high tax rates, which are likely the result of tax incentives and other targeted concessions, highlight the revenue-raising potential of the global minimum tax, even in jurisdictions that have previously been thought to be high-tax.”
OECD
