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15 November 2022

Winning Paper of this years Franco-German Fiscal Policy Seminar: “Revenue Effects of the Global Minimum Tax Under Pillar Two”

In October 2021, 137 countries and jurisdictions agreed to implement a major reform of the international corporate tax system, i.e., a global minimum tax of 15% on the profits of large multinational companies. The winning paper presents simulations of the revenue effects of the global minimum tax.

Two possible scenarios are considered regarding who collects the minimum tax: The country in which the headquarters are located based on the income inclusion rule (IIR) or the host country of foreign affiliates as laid out under the qualified domestic minimum top-up tax (QDMTT).

Based on a sample of eighty-three parent countries, it is estimated that headquarters countries could collect a total revenue of EUR 179 billion globally. The EU Member States could receive EUR 67 billion from a 15% minimum top-up tax. Carve-outs reduce the potential tax revenues by approximately 14% to 22% over the entire sample. Under the current agreement, the European Union can expect a total tax revenue of EUR 55 billion yearly.