Pareto-Improving Minimum Corporate Taxation

October 22, 2021

Preview Citation

Format: Chicago

Shafik Hebous, and Michael Keen. Pareto-Improving Minimum Corporate Taxation, (USA: International Monetary Fund, 2021) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The recent international agreement on a minimum effective corporate tax rate 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 tax competition game--—are critical for assessing the design and welfare impact of, and prospects for, this fundamental policy innovation. Analysis and calibration plausibly suggest sizable scope for minima that are Pareto-improving, benefiting low as well as high tax countries, over the uncoordinated equilibrium.

Subject: Competition, Corporate income tax, Expenditure, Financial markets, Revenue administration, Tax avoidance, Taxes

Keywords: Best response, Competition, Competition game, Corporate income tax, Corporate tax reform, Corporate Tax Reform, Country benefit, Global, International Taxation, Minimum Taxation, Policy objective, Residence country, Tax avoidance, Tax Competition

Publication Details

Pages:

23
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2021/250
Stock No:

WPIEA2021250
ISBN:

9781557756183
ISSN:

1018-5941

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