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Pareto-improving minimum corporate taxation

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  • Hebous, Shafik
  • Keen, Michael

Abstract

The international agreement on a minimum effective corporate tax rate, implementation of which is imminent, marks a profound change in global tax arrangements. The appropriate level of that minimum, however, has been, and remains, extremely contentious. This paper explores the strategic responses to a minimum tax, which – the policy objective being to change the rules of the tax competition game – are critical for assessing the design and welfare impact of this fundamental policy innovation. Analysis and calibration plausibly suggest sizable scope for minima that are Pareto-improving, benefiting low tax countries as well as high, relative to the uncoordinated equilibrium.

Suggested Citation

  • Hebous, Shafik & Keen, Michael, 2023. "Pareto-improving minimum corporate taxation," Journal of Public Economics, Elsevier, vol. 225(C).
    • Handle: RePEc:eee:pubeco:v:225:y:2023:i:c:s0047272723001342
    DOI: 10.1016/j.jpubeco.2023.104952
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    Cited by:

    1. David R. Agrawal, 2024. "Limits to Competition: Strategies for Promoting Jurisdictional Cooperation," NBER Chapters, in: Policy Responses to Tax Competition, National Bureau of Economic Research, Inc.
    2. Chen, Xuyang, 2024. "The Global Minimum Tax, Investment Incentives and Asymmetric Tax Competition," MPRA Paper 121893, University Library of Munich, Germany.
    3. Xuyang Chen, 2024. "The Global Minimum Tax, Investment Incentives and Asymmetric Tax Competition," Papers 2409.05397, arXiv.org.
    4. Mr. Shafik Hebous & Andualem Mengistu, 2024. "Efficient Economic Rent Taxation under a Global Minimum Corporate Tax," IMF Working Papers 2024/057, International Monetary Fund.
    5. Antonella Nocco & Gianmarco I. P. Ottaviano & Matteo Salto & Atsushi Tadokoro, 2024. "Leaving the global playing field through optimal non-discriminatory corporate taxes and subsidies," CEP Discussion Papers dp1992, Centre for Economic Performance, LSE.
    6. Andreas Hauer & Hayato Kato, 2024. "A Global Minimum Tax for Large Firms Only: Implications for Tax Competition," Discussion Papers in Economics and Business 24-06, Osaka University, Graduate School of Economics.
    7. Janeba, Eckhard & Schjelderup, Guttorm, 2023. "The global minimum tax raises more revenues than you think, or much less," Journal of International Economics, Elsevier, vol. 145(C).
    8. Johannesen, Niels, 2022. "The global minimum tax," Journal of Public Economics, Elsevier, vol. 212(C).
    9. Guttorm Schjelderup & Frank Stähler, 2024. "The economics of the global minimum tax," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(4), pages 935-952, August.
    10. 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.
    11. Maebayashi, Noritaka & Morimoto, Keiichi, 2024. "Global corporate income tax competition, knowledge spillover, and growth," European Economic Review, Elsevier, vol. 164(C).
    12. Corti Paul Lakuma & Rehema Kahunde, 2023. "Global minimum corporate income tax: Challenges and prospects for Uganda," WIDER Working Paper Series wp-2023-137, World Institute for Development Economic Research (UNU-WIDER).
    13. Nabavi Pardis & Nordström Martin, 2023. "The Impact Assessment of Implementing a Global Minimum Tax for MNEs in Sweden," Nordic Tax Journal, Sciendo, vol. 2023(1), pages 111-123, December.
    14. Alexandre Chirat & Guillaume Sekli, 2022. "Assessing the credibility and fairness of international corporate tax rate harmonization via cooperative game theory," Working Papers 2022-08, CRESE.
    15. David R. Agrawal & James M. Poterba & Owen M. Zidar, 2024. "Policy Responses to Tax Competition: An Introduction," NBER Working Papers 32090, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    Tax competition; Minimum taxation; Corporate tax reform; International taxation;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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