MondoPolitiche sociali ed economiche

New challenges, new rules: the Global Minimum Corporate Tax

Abstract

It is widely acknowledged that the current international corporate tax system is inefficient and no longer fit for its purpose. Multinational enterprises (MNE) exploit the loopholes arising from vulnerable tax treaties, often securing one-digit tax rates. The result is a general environment of decreasing corporate tax revenues for the tax rights-bearing countries. This report capitalises on the wave of change brought by the recently agreed Statement on a Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalization of the Economy to spark reflections on the international corporate income tax framework at a broader scale. This will be done in four ways. First, to empower the reader with the necessary tools to navigate the topic, our analysis offers a summary of the main corporate taxation systems. Second, we delve deep into the functioning of the Statement, with a particular focus on Pillar Two. Third, we step back and assess both the history of corporate tax treaties for the past century and the most widely adopted tax minimisation schemes. Lastly, a graphical analysis of several key indicators at the European level will pave the way for a quantitative study. In the latter, we evaluate the much-debated relationship between corporate tax rates and economic growth. Our findings, in line with an established strand of literature, suggest that changes in corporate income tax rates do not have statistically significant effects on the economy as a whole in the long run.

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By Roberto Fei, Massimo Moltoni and Gabriele Romeo

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