Taxation of Multinationals: Design and Quantification

Sébastien Laffitte (1) , Julien Martin (2) , Mathieu Parenti (3) , Baptiste Souillard (3) , Farid Toubal (4, 2, 5)

1 CEPS - Centre d'Economie de l'ENS Paris-Saclay
2 CEPR - Center for Economic Policy Research
3 ECARES - European Center for Advanced Research in Economics and Statistics
4 CEPII - Centre d'Etudes Prospectives et d'Informations Internationales
5 LEDa - Laboratoire d'Economie de Dauphine

Minimum corporate taxation is the second Pillar of the reforms of international corporate taxation. It is a simple and powerful tool that could curb profit shifting towards low or no tax jurisdictions. Its implementation would allow France to tax the profits that French headquarters have shifted to tax havens, but also to reduce the erosion of its tax base. We estimate the French corporate income tax (CIT) revenues would increase by almost 6 billion euros in the short run after the implementation of an effective minimum tax rate of 15% and by 8 billion euros at a rate of 21%. CIT gains may vary substantially depending on the scope of the tax base, the possibility of headquarters’ inversion, and whether it includes domestic corporations or not. CIT gains are relatively higher in France than in Germany or the United States. The expected gains are substantially larger than those to be expected from the implementation of the first Pillar of the reform in its version proposed by the US in April 2021, which opens up rights to tax the 100 largest corporations in the world according to their sales’ destination. According to our estimates, Pillar One would bring in about 900 million euros for France.

Mots clés: Tax rate; multinational corporation; reform

Domaines: Économie et finance quantitative [q-fin]

Sébastien Laffitte, Julien Martin, Mathieu Parenti, Baptiste Souillard, Farid Toubal. Taxation of Multinationals: Design and Quantification. [Research Report] Université du Québec à Montréal;Canada. 2021, pp.13. ⟨hal-03361513⟩