A global minimum tax for large firms only: Implications for tax competition

Haufler, Andreas and Kato, Hayato (2025): A global minimum tax for large firms only: Implications for tax competition.

Abstract

The Global Minimum Tax (GMT) is applied only to firms above a certain size threshold, permitting countries to set differential tax rates for small and large firms. We analyse tax competition among multiple tax havens and a non-haven country for heterogeneous multinationals to evaluate the effects of this partial coverage of GMT. Upon the introduction of a moderately low GMT rate, the havens commit to the single uniform GMT rate for all multinationals. However, gradual increases in the GMT rate induce the havens, and subsequently the non-haven, to adopt discriminatory, lower tax rates for small multinationals. Our calibration exercise shows that introducing a GMT rate of 15\% results in a regime where only the havens adopt split tax rates. Welfare and tax revenues fall in the havens but rise in the non-haven, yielding a positive net gain worldwide.

• Item Type: MPRA Paper
• Language: English
• Keywords: Tax avoidance; Global minimum tax; Profit shifting; Multinational firms
• Subjects: F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms ; International Business; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H25 - Business Taxes and Subsidies; H - Public Economics > H8 - Miscellaneous Issues > H87 - International Fiscal Issues ; International Public Goods

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