21/11/2023 - 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 new data and estimates on taxation of large MNE profits show how tax incentives and other concessions in jurisdictions with high statutory and 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 domestic resource mobilisation for high-tax and low-jurisdictions alike.
The OECD’s latest Corporate Tax Statistics report and a new 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 working paper finds that an estimated 37.1% (USD 2 411 billion) of global net profits (totalling USD 6 503 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 MNE taxation in more than 160 countries and jurisdictions, bringing together new detailed information on MNEs’ international activities, as well as two years of aggregated Country-by-Country Reporting (CbCR) data shared between companies and tax authorities.
The report shows continued misalignment of MNE profits and real economic activity in markets worldwide. The median value of MNE revenues per employee in investment hubs is USD 1 710 000, as compared to USD 290 000 for all other jurisdictions. While these effects could reflect some commercial considerations, they likely also indicate the existence of base erosion and profit shifting (BEPS) practices, further highlighting the importance of implementing the global tax agreement.
The publication and data are accessible at: https://oe.cd/corptaxstats.
A list of Frequently Asked Questions on CbCR is available at: https://oe.cd/corporate-tax-stats-CbCR-FAQ.
Media queries should be directed to Manal Corwin, Director of the OECD Centre for Tax Policy and Administration (CTPA), Pierce O'Reilly (+33 1 4524 8886), Head of CTPA's Business and International Taxes Unit or Lawrence Speer in the OECD Media Office (+33 1 45 24 97 00).
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