Scholarlink

<p>We examine the implications of the international agreement on a minimum corporate tax for multinational investment, measured using forward-looking effective tax rates (ETRs). We show that Pillar Two breaks the equivalence between otherwise equivalent forms of efficient economic-rent taxation—cash-flow taxation and an allowance for corporate equity (ACE). When the top-up tax binds, the minimum tax can fall on the normal return under systems that would otherwise be neutral. Moreover, the marginal effective tax rate (METR) under a cash-flow tax is weakly lower than under an ACE. A key policy implication is that, to preserve efficiency, domestic profit tax design can aim to avoid a binding minimum tax—for example, by combining a cash-flow tax with a statutory rate of at least 15 percent. We apply the ETR methodology to a cross-country sample and illustrate magnitudes under Pillar Two, showing that jurisdictions with statutory rates below 15 percent experience higher ETRs once the top-up tax applies than in the pre–Pillar Two baseline. Finally, the framework clarifies how the minimum tax interacts with investment incentives, enabling quantification of how Pillar Two reshapes ETR differentials relevant for multinational location decisions and international capital allocation.</p>

错误：搜索内容不能为空，请输入英文关键词
错误：关键词超出字数限制，请精简
高级检索

Forward-Looking Effective Tax Rates under the Global Minimum Corporate Tax

  • 期刊论文

  • 发表日期：

    2026年6月16日

查看全文
  • Shafik Hebous,
  • Andualem Mengistu

摘要

We examine the implications of the international agreement on a minimum corporate tax for multinational investment, measured using forward-looking effective tax rates (ETRs). We show that Pillar Two breaks the equivalence between otherwise equivalent forms of efficient economic-rent taxation—cash-flow taxation and an allowance for corporate equity (ACE). When the top-up tax binds, the minimum tax can fall on the normal return under systems that would otherwise be neutral. Moreover, the marginal effective tax rate (METR) under a cash-flow tax is weakly lower than under an ACE. A key policy implication is that, to preserve efficiency, domestic profit tax design can aim to avoid a binding minimum tax—for example, by combining a cash-flow tax with a statutory rate of at least 15 percent. We apply the ETR methodology to a cross-country sample and illustrate magnitudes under Pillar Two, showing that jurisdictions with statutory rates below 15 percent experience higher ETRs once the top-up tax applies than in the pre–Pillar Two baseline. Finally, the framework clarifies how the minimum tax interacts with investment incentives, enabling quantification of how Pillar Two reshapes ETR differentials relevant for multinational location decisions and international capital allocation.