Effective tax rates of MNEs
New evidence on global low-taxed profit
The effective taxation of corporate profits is at the centre of an active public and
academic debate. This debate is often focused on the extent of low-taxed profit of
multinational enterprises (MNEs) in jurisdictions with low statutory tax rates or
low average effective tax rates (ETRs). However, some affiliates in high tax jurisdictions
may also be subject to low ETRs, due to tax incentives or other provisions. To date,
a global accounting of the ETRs paid by MNEs that incorporates within-country heterogeneity
has been missing.
Using a new dataset on the global activities of large MNEs, this paper provides new
estimates of the distribution of effective tax rates of large MNEs across and within
jurisdictions. The results show that low tax profit is common, and that substantial
low-taxed profit exists outside low tax jurisdictions. We estimate that high tax jurisdictions
(jurisdictions with average ETRs of above 15%) account for more than half (53.2%)
of global profits taxed below 15%, much more than very low tax jurisdictions (those
with average ETRs below 5%) which only account for 18.7% of low-taxed profits. This
suggests that an assessment of global low-taxed profit that focuses only on jurisdictions
with low average ETRs could potentially miss out on more than half of global low-taxed
profit.
Published on November 21, 2023
In series:OECD Taxation Working Papersview more titles