Scandinavian Working Papers in Economics
Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science
No 2023/3: The Economics of the Global Minimum Tax
Guttorm Schjelderup () and Frank Stähler ()
Additional contact information
Guttorm Schjelderup: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Frank Stähler: Faculty of Economics and Social Sciences, University of Tübingen, Postal: University of Tübingen, Faculty of Economics and Social Sciences, Mohlstr. 36, D-72074, Tübingen, Germany
Abstract: This paper shows that the OECD inclusive framework of Pillar Two fails to implement the claimed 15% minimum corporate tax for subsidiaries of multinational corporations. The reason is that the Substance-based Income Exclusion of Pillar Two allows to tax-deduct payroll costs and user costs of intangible assets twice from the tax base of the top-up tax. Employing a standard multinational firm model, we show that Pillar Two dampens tax motivated transfer pricing, but changes the employment, investment and import incentives. For a sufficiently large cost share of labor and/or capital, the Substance-based Income Exclusion is equivalent to a production subsidy.
Keywords: Corporate taxation; BEPS; Pillar Two; minimum tax
Language: English
21 pages, First version: March 14, 2023. Revised: March 21, 2023.
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