LibGuides: CoR Plenary (April 2022): Global minimum level of taxation for multinational groups in the Union

Global minimum level of taxation for multinational groups in the Union

Fair and simpler taxation supporting the recovery strategy - Ways to lower compliance costs and improve EU corporate income taxation
This study analyses the gaps and challenges in the EU corporate income tax (CIT) legislation, and evaluate the European Added Value (EAV) of potential policy options to address these challenges. A thorough comparative economic analysis is made of the EAV of a series of scenarios, based upon the policy options identified. The results confirm that complexity remains by far the greatest factor behind both the CIT gap and the high level of compliance costs for businesses. Insufficient transparency, lack of administrative effectiveness and lack of efficient enforcement are also of particular relevance for businesses as they have a relatively large impact on compliance costs. As expected, the move towards digitalisation of the tax administration also appears as an option to reduce both the CIT gap and compliance costs in all scenarios, but probably to a lesser extent than what is sometimes assumed.
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EP, Study - Sept 2021
Implementation of the EU requirements for tax information exchange
The Directive on administrative cooperation (DAC) in the field of taxation provides the basis for information exchange on direct taxation within the EU. This European Implementation Assessment evaluates the implementation of the initial directive and the first three amendments (DAC1-4). Building mainly on interviews with tax administrations and a survey among stakeholders, this publication provides additional evidence on the directive’s effectiveness and external coherence, looking at its interaction with other EU legislation and with tax information frameworks at international level. Despite broad agreement among the institutions and stakeholders on the usefulness of DAC, there is a need for further work in the area of tax information exchange. This study therefore contains a list of detailed recommendations for further improvement to the directive’s effectiveness and coherence, offering a basis for discussions.
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EP, Study - Feb 2021
Taxing Multinationals in Europe
This paper aims to contribute to the European policy debate on corporate income tax reform in three ways. First, it takes a step back to review the performance of the CIT in Europe over the past several decades and the important role played by MNEs in European economies. Second, it analyses corporate tax spillovers in Europe with a focus on the channels and magnitudes of both profit shifting and CIT competition. Third, the paper examines the progress made in European CIT coordination and discusses reforms to strengthen the harmonization of corporate tax policies, in order to effectively reduce both tax competition and profit shifting.
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Ernesto Crivelli, Ruud A. de Mooij, and J. E. J. De Vrijer, IMF, May 2021
Collecting the tax deficit of multinational companies simulations for the European Union
This study estimates how much tax revenue the European Union could collect by imposing a minimum tax on the profits of multinational companies. The authors compute the tax deficit of multinational firms, defined as the difference between what multinationals currently pay in taxes, and what they would pay if they were subject to a minimum tax rate in each country. The authors then consider three ways for EU countries to collect this tax deficit.
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Mona Barake, Theresa Neef, Paul-Emmanuel Chouc, Gabriel Zucman, EU Tax Observatory, June 2021
The politics of taxing multinational firms in a digital age
Taxing multinationals is politically difficult because of the structural power of mobile firms within the global economy, and this structural power is expected to increase in the digital age. Recently however there has been a breakdown in the international corporate tax consensus that structured tax competition over the past century. A new norm of international taxation has emerged whereby states claim the right to tax corporate income based on presence in consumer markets. Our paper explains this unexpected reassertion of state power. Building on previous accounts of large-scale change in policy norms, we show how the emergence of digital business models led to a new tax consensus by setting in train a process of policy contestation that allowed countries to levy taxes on multinationals unilaterally, without fear of capital flight.
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Margarita Gelepithis and Martin Hearson, Journal of European Public Policy, Dec 2021.

The rise of the digital economy: Rethinking the taxation of multinational enterprise
The international tax regime in relation to multinational enterprises (MNEs) is ineffective and a rethink is required. We illustrate that the tax avoidance motive of MNEs can incentivize managers to locate profits in low-tax jurisdictions without affecting the locations of their real operations. We also argue that proposals to tax shareholders and consumers rather than corporate profits face significant theoretical and practical obstacles. Finally, we extend a recently proposed model to tax MNEs using a sales-based allocation of consolidated worldwide profits. This aims to prevent MNEs shifting profits to low-tax
jurisdictions and reduces incentives for tax competition between countries.

Antony Ting and Sidney J. Gray, Journal of International Business Studies (2019) 50, pp. 1656–1667.
Corporate tax and location choice for multinational firms
This article examines the effects of corporate tax on these location decisions of newly established multinational subsidiaries across 26 European countries over an 8-year period. We contribute to the existing literature by examining the effects of a non-linear response of firm location decisions to changes in the tax rate. We also show that there are large variations in the sensitivity to tax rates across sectors and firm size groups. In particular, financial sector firms are more than twice as sensitive to changes in corporation tax rates relative to other sectors. Our baseline result is a finding that a 1% increase in the statutory or policy rate of corporation tax would lead to a reduction in the conditional location probability of 0.68%. Using the effective average tax rate, the marginal effect implies a reduction in the location probability of 1.15% following a 1% increase in the tax rate. Although overall tax has the expected negative effect on location probability, the marginal effect of an increase is lower at higher rates of tax.

Martina Lawless et al. APPLIED ECONOMICS, 2018, VOL. 50, NO. 26, pp. 2920–2931.