elpais.com
Global Minimum Tax Shifts Focus to Tax Base Reduction
A new global minimum 15% corporate tax, agreed upon by over 130 countries, aims to stop the race to the bottom in corporate tax rates; however, the EU's Fiscal Observatory study shows this may shift competition towards tax base reduction incentives instead, as evidenced by a 2.7 percentage point decrease in the effective tax rate paid by large multinationals (from 20.8% to 18.1%) in the EU between 2014 and 2022.
- What is the immediate impact of the global minimum 15% corporate tax on international tax competition?
- The 15% minimum corporate tax rate, adopted by over 130 countries, aims to curb the race to the bottom in corporate tax rates. However, the EU's Fiscal Observatory notes that this may shift competition towards tax base reduction incentives instead of nominal rate cuts. This is supported by a 2.7 percentage point decrease in the effective tax rate paid by large multinationals in the EU between 2014 and 2022, exceeding the reduction in the statutory rate.
- How have EU member states' tax reforms from 2014-2022 contributed to the decrease in the effective tax rate paid by large multinationals?
- The study analyzed nearly 300 tax reforms in EU member states from 2014-2022, revealing that 86% (254 measures) focused on base erosion, primarily through special regimes for investment attraction and R&D. This contrasts with recommendations from international institutions favoring broader tax bases and lower rates. The effective average tax rate for large multinationals decreased from 20.8% to 18.1% despite statutory rate reductions.
- What are the potential long-term economic consequences of shifting international tax competition from nominal tax rates to tax base reduction strategies?
- The global minimum tax, while intending to limit tax avoidance, may inadvertently intensify competition through tax base reduction incentives like R&D tax breaks. Countries might use these incentives to attract investment, potentially leading to a reallocation of investments and profits without significant economic effects, as suggested by the study. The continued focus on tax base reduction highlights the evolving nature of international tax competition.
Cognitive Concepts
Framing Bias
The article frames the global minimum tax as a potential shift in the nature of tax competition, rather than a solution. By highlighting the continued potential for tax competition through base erosion, the article subtly undermines the effectiveness of the global minimum tax. The headline, if there was one (not provided in the text), might emphasize this shift rather than the achievement of the minimum tax agreement.
Language Bias
The language used is largely neutral and objective. However, phrases like "race between States" and "frenazo" (sudden stop) carry slight connotations and could be replaced with more neutral terms such as "competition among States" and "significant reduction".
Bias by Omission
The analysis focuses primarily on corporate tax rates and incentives within the EU, potentially overlooking global perspectives and the impact on developing nations. The article mentions the global minimum tax but doesn't delve into the complexities or challenges of its implementation in diverse economic contexts. This omission limits a comprehensive understanding of the issue's broader implications.
False Dichotomy
The article presents a somewhat simplified view of the competition between tax reduction and base erosion. While it acknowledges both strategies, it doesn't fully explore the nuances and potential interplay between them. The implication that the shift is solely towards base erosion might oversimplify the evolving landscape of international tax policy.
Sustainable Development Goals
The implementation of a global minimum corporate tax aims to reduce tax avoidance by multinational corporations, preventing them from shifting profits to low-tax jurisdictions. This contributes to a fairer distribution of tax revenue among countries and can help reduce income inequality.