Council on Economic Policies Blog: The Global Tax Deal and Tax Incentives – What if the Cure Is Worse Than the Disease?

By Agustin Redonda | 21 March 2022

The global tax deal reached in October 2021 is a milestone in international tax coordination. With 137 out of 141 jurisdictions in the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) now participating in the agreement, there is no doubt about its significance. The new rules are designed to limit harmful tax competition through a minimum corporate tax rate of 15% for MNEs with global sales above EUR 20 billion and profitability above 10%, and are projected to increase global tax revenue by US$150 billion annually. They will also shift taxing rights on more than US$125 billion of profits each year from the low tax countries where they have currently been booked to the countries where they have been earned.

Yet, the devil is in the details, and the tax deal has not come without controversy. CEP Senior Fellow Agustín Redonda sheds light on tax incentives, which developing countries might resort to, and how their use and design could influence the outcome of the tax deal in his latest CEP Blog. You can read the blog here.